Pacific Fibre's planned undersea fiber optic cable set to begin service in 2013. (click to enlarge)

Australia and New Zealand remain the two countries most notorious for Internet Overcharging schemes like usage caps and speed throttles.  The lack of international broadband capacity is routinely blamed for limiting broadband usage for consumers in both southern Pacific countries, and now a major undersea fiber optic cable project seeks to end those Internet Overcharging schemes once and for all.

Pacific Fibre hates usage caps.  The company, which is one of the partners in a planned 5.12 terabits per second undersea cable connecting the United States with New Zealand and Australia, believes limiting broadband consumption is bad for business — theirs and the digital economies of both nations.  Now the company is reportedly willing to put its money where its mouth is, charging broadband providers a flat rate per customer for unlimited access to its backbone network.

The company believes such pricing will force providers into selling more generous, often unlimited broadband service packages for businesses and consumers.  Providers have routinely blamed insufficient international capacity for restrictive data caps.  But increasing capacity, including Pacific Fibre’s new cable set to begin service in 2013, removes that excuse once and for all.

Co-founder Rod Drury believes there will be so much capacity, if providers continue to engage in Internet Overcharging schemes, most of the newly available bandwidth could actually go unsold.

“Why don’t we flip the model around and go to a per-person charging model and then try to give internet providers as much bandwidth as we possibly can for that?,” Drury told BusinessDay.  “The charges could be segmented by customer type; you could do it for mobile connections, home connections, schools, hospitals and businesses, and set a reasonable price.”

Click here to view the embedded video.

CNBC talked with Pacnet CEO Bill Barney, one of the partners in the Pacific Fibre project, about bandwidth needs in Asia and how new undersea fiber cables will meet the growing demands.  (Segment one of the interview was done in June, segment two in July.)  (10 minutes)

Telecommunications Users Association chief executive Ernie Newman said Drury’s idea was long overdue. “The way the world is moving is towards all-you-can-eat-type plans and any move like that has got to be the way of the future.”

But one of Pacific Fibre’s competitors, Southern Cross, which currently provides undersea fiber connections for South Pacific Internet Service Providers, said he wasn’t sure Drury’s idea would work.

Southern Cross marketing director Ross Pfeffer said broadband providers haven’t been justified limiting broadband usage for some time, as newly available capacity has already helped ease the bandwidth crunch.  Instead, critics contend existing providers don’t want to give up the massive profits they are earning limiting usage, maximizing revenue from users who think twice before using high bandwidth services, thus reducing required investments in network upgrades.

“New Zealand internet providers [are] using data caps to segment the retail market and maximize their own revenues,” Pfeffer noted.

Both Australia and New Zealand are embarked on National Broadband Plans to take back some control of their broadband futures from private providers many accuse of monopolizing an increasingly important part of both countries’ digital economies.

Drury’s project, and others like it, may become important components of newly constructed national fiber-to-the-home projects proposed in Australia, and dramatically improved service in New Zealand.

Click here to view the embedded video.

The history of deploying underseas cables is a fascinating one.  Check out this 1936 documentary showing how AT&T made undersea phone cables to connect the San Francisco Bay area.  Back then, companies didn’t use rubber or plastic cable jackets to keep the water out.  They used jute fiber and paper!  Some other companies used gutta percha, which is today best known for root canal fillings, or tar mixtures.  (5 minutes)

Click here to view the embedded video.

Before there was telephone service, the challenges of connecting the far flung components of the British Empire were met by underseas telegraph cables beginning in the 1870s.  A fascinating BBC documentary visited Porthcurno, located at the tip of Cornwall, England, where 14 undersea telegraph cables stretched from a single beach to points all around the globe. Then something called “wireless” arrived and threatened to ruin everything.  (8 minutes)

Click here to view the embedded video.

But what exactly is “fiber optic cable” and how is it made?  More importantly, how do they store thousands of miles of fiber optic cable on a single ship, ready to drop to the bottom of the ocean?  The answers to both are here.  (12 minutes)

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Time Warner Cable faces an increasing number of subscribers cutting their cable television service off, choosing to watch their video entertainment online.

Now the nation’s second largest cable company is trying to mitigate the potential damage with a series of new applications designed to bring cable television and your computer, cell phone, and iPad together.

Time Warner is getting started with the iPad, developing an application that will help cable subscribers remotely control their DVR cable box to record and manage programming.  Away from home and want to scan a program guide and record an upcoming show?  The new app will let you do it.  Need to grab some video on-demand from Time Warner?  Not a problem.  You can even start watching on your iPad and pick up where you left off from your home.

Integrating the many devices consumers use as part of their daily lives with cable television could bring the cable viewing experience back front and center among at least some subscribers.  That reduces the chance customers will decide they can do without cable TV.  Since most of Time Warner Cable’s on demand library will only be available to current cable subscribers, cutting cable’s cord also means an end to online on-demand viewing of cable-licensed programming.

Time Warner Cable's prototype iPad app

Time Warner Cable CEO Glenn Britt has repeatedly emphasized his interest in delivering cable services the way customers want, and claims the new generation of applications on the way from the cable company will provide just that.

Although Time Warner will start with the iPad, the application will quickly become available for the iPhone and iPod Touch series.  Additionally, versions for other smartphones as well as portable and home computers will soon follow.

Ironically, this integration process could drive data volumes on Time Warner Cable’s broadband network to new heights.  Video streaming alone will dramatically increase traffic.  Yet the same company that is ready and willing to provide these bandwidth-intensive services also complained about existing broadband customers “using too much” of their existing broadband service.  In the spring of 2009, the company sought to implement a 40GB usage limit on some its broadband customers and charge up to three times more — $150 a month for unlimited access.  At the time, Britt and other company officials blamed the burden of online video and other usage-intensive applications for spiking the demand on their network.

Customers may wonder whether Britt’s new enthusiasm for online video means he recognizes their network has plenty of capacity to support unlimited access or is looking for a new excuse to justify a return to Internet Overcharging schemes.

Click here to view the embedded video.

Time Warner Cable CEO Glenn Britt, CTO Mike LaJoie, VP of Web Services Jason Gaedtke and Director of Digital Communications Jeff Simmermon ponder their prototype iPad app and discuss the implications of integrating cable TV with other electronic devices.  For Time Warner Cable, it’s a matter of preserving cable TV subscribers who might contemplate cutting the cable TV cord and watching everything online.  (13 minutes)

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Your Friendly Internet traffic cops Time Warner Cable and Comcast paid for research that suggests those Internet speed slowdowns are your fault (or at least not theirs).

A study from MIT suggests that broadband speed test results that show “real world” broadband speeds far below what your provider promises are actually better than you think, and if they’re not — it’s not your provider’s fault.  The paper, Understanding Broadband Speed Measurements, finds slow Internet speeds are often your problem, because you run too many applications on your computer, visit inaccurate speed measurement sites, use a wireless router, or have run into an Internet traffic jam outside of the control of your ISP.

The research comes courtesy of MIT’s Internet Traffic Analysis Study (MITAS) project, financially backed by some of North America’s largest cable and phone companies — Clearwire, Comcast, Liberty Global (Dr. John Malone, CEO), and Time Warner Cable in the United States, Rogers Communications and Telus in Canada.  Those providers also deliver much of the broadband speed data MITAS relies on as part of its research.  Additional assistance came from MIT’s Communications Futures Program which counts among its members Cisco, an equipment manufacturer and promoter of the “zettabyte” theory of broadband traffic overload and cable giant Comcast.

The study was commissioned to consider whether broadband speed is a suitable metric to determine whether an ISP provides good or bad service to its customers and if speed testing websites accurately depict actual broadband speeds.  Because Congress and the Federal Communications Commission have set minimum speed goals and have expressed concerns about providers actually delivering the speeds they promise, the issue of broadband speed is among the top priorities of the FCC’s National Broadband Plan.

“If you are doing measurements, and you want to look at data to support whatever your policy position is, these are the things that you need to be careful of,” Steve Bauer, technical lead on the MIT Analysis Study (MITAS) told TG Daily. “For me, the point of the paper is to improve the understanding of the data that’s informing those processes.”

Bauer’s 39 page study indicts nearly everyone except service providers for underwhelming broadband speeds:

While a principal motivation for many in looking at speed measurements is to assess whether a broadband access ISP is meeting its commitment to provide an advertised data service (e.g. “up to 20 megabits per second”), we conclude that most of the popular speed data sources fail to provide sufficiently accurate data for this purpose. In many cases, the reason a user measures a data rate below the advertised rate is due to bottlenecks on the user-side, at the destination server, or elsewhere in the network (beyond the access ISP’s control). A particularly common non-ISP bottleneck is the receive window (rwnd) advertised by the user’s transport protocol (TCP).

In the NDT dataset we examine later in this paper, 38% of the tests never made use of all the available network capacity.

Other non-ISP bottlenecks also exist that constrain the data rate well below the rate supported by broadband access connections. Local bottlenecks often arise in home wireless networks. The maximum rate of an 802.11b WiFi router (still a very common wireless router) is 11mbps. If wireless signal quality is an issue, the 802.11b router will drop back to 5.5mbps, 2mbps, and then 1 mbps. Newer wireless routers (e.g. 802.11g/n) have higher maximum speeds (e.g. 54 mbps) but will similarly adapt the link speed to improve the signal quality.

End-users also can self-congest when other applications or family members share the broadband connection. Their measured speed will be diminished as the number of competing flows increase.

The study also criticizes the FCC for relying on raw speed data that does not take into account the level of service being chosen by a broadband customer, claiming many service providers actually deliver higher speed service than their “lite” plans advertise.

In short, it’s everyone else’s fault (including yours) for those Internet speed slowdowns.

Ultimately, the report’s conclusion can be summed up in three words: change the subject.  It’s not slow broadband speeds that are the problem — it’s the lack of understanding about what you can accomplish with the speeds you do get from your ISP:

In the next few years, as the average speed of broadband increases, and the markets become more sophisticated, we expect that attention may shift towards a more nuanced characterization of what matters for evaluating the quality of broadband services. Issues such as availability (reliability) and latencies to popular content and services may become more important in how services are advertised and measured. We welcome such a more nuanced view and believe it is important even in so far as one’s principal focus is on broadband speeds.

One thing the paper does effectively deliver at top speed are industry talking points, particularly the one that says less regulation is better (underlining ours):

Our hope is that progress may be made via a market-mediated process that engages users, academics, the technical standards community, ISPs, and policymakers in an open debate; one that will not require strong regulatory mandates. Market efficiency and competition will be best served if there is more and better understood data available on broadband speeds and other performance metrics of merit (e.g., pricing, availability, and other technical characteristics).

These kinds of research reports are often tainted by the industry money that pays for them.  Researchers and universities routinely deliver industry-pleasing, sober-sounding studies in return for considerable financial contributions, grants, and other forms of underwriting.  This report lacks full disclosure about who is helping to pay for it — North America’s largest cable operators, who also deliver much of the data MITAS relies on for their research.

Ask yourself how much longer these companies would be writing checks to MIT had they delivered a report implicating them in false advertising of speeds they do not deliver or for relying on inadequate upstream providers to handle their Internet traffic?  The report pulls any and all punches delivered to the companies who finance it — a clear sign of bought-and-paid-for research in action.

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More dollar-a-holler advocacy for AT&T in the pages of CNET. AT&T brings the money, lobbyists ride their former credentials to deliver exactly the "facts" AT&T wants to read.

CNET last week shamefully handed over column space to a barely-disclosed AT&T lobbyist trotting out the latest unfounded, anti-consumer nonsense: tiered data plans help bring broadband to the poor.

It’s all part of AT&T’s Re-education campaign to sucker convince Americans that paying more for less service is a good thing:

New analysis shows that as Internet providers ramp up their investments to accommodate the surge in bandwidth demand, the old, one-price-for-everybody model would slow our progress toward universal adoption, especially by lower-income Americans.

The first reaction of many Internet users to this news may well be disbelief. How can it be that a pricing approach that has worked so well for so many years can suddenly become obsolete and even counterproductive? The answer is that technological advances have changed what many of us do online, which, in turn, has changed the economics.

A techno-ecosystem once dominated by e-mail and text now is increasingly characterized by high-definition video that claims up to 1,000 times as much network capacity and bandwidth as simple text. The way we currently pay for the infrastructure required to keep the network humming also will have to change.

The only humming we hear is AT&T’s dollar bill-counting machines.

When at first you don’t succeed, try, try again.  Robert J. Shapiro and his co-author Kevin Hassett’s latest work, “A New Analysis of Broadband Adoption Rates By Minority Households,” is simply a rehash — spoiled leftover bologna — of their last bought-and-paid-for-study we analyzed last fall.  Both reports are tailor-made to appeal to the minority-interest groups that are part of AT&T’s Rainbow Coalition of Cash — groups that engage in dollar-a-holler advocacy of AT&T’s agenda while quietly depositing their substantial contribution checks.

The report assumes quite a lot:

• That broadband service adoption rates in minority communities are too low because heavy users are artificially keeping broadband prices too high;
• That without tiered data plans, AT&T can never afford to expand broadband service;
• That unlimited broadband tiers can never co-exist with tiered plans — it’s one-size-fits-all under today’s bad pricing model;
• That a grand exaflood is coming to swamp broadband users of all kinds, and without tiered pricing to finance upgrades, we could all drown.

For the second time, Shapiro and Hassett try to stick the bill for upgrades on so-called “heavy users,” who they suggest should pay 80 percent of the upgrade costs through higher priced broadband service.  They also want content producers to cough up — the “they can’t use my pipes for free”-argument AT&T loves.

How will customers react to paying huge surcharges on their broadband bills?  According to the report’s authors, heavy users won’t mind because they are “price-insensitive.”

Ask Time Warner Cable customers in New York, Texas, and North Carolina if they minded the prospect of paying $150 a month for broadband service they used to pay $50 a month to receive.  How about Frontier’s customers in Mound, Minnesota asked to pony up $250 a month for up to 3Mbps DSL service because they exceeded Frontier’s 5GB monthly usage allowance?

The report has several other glaring fact-gaps:

• Tiered service plans are already available industry-wide, based on broadband speed, not usage.  Low income customers can obtain cheaper broadband today, if companies decide to advertise it;
• The wounds from high broadband pricing are industry self-inflicted.  They charge $40 or more for a service their financial reports suggest costs less than $10 a month to provide;
• Providers can achieve universal broadband first by extending existing networks to rural America, upgrading them to fiber as the economy of scale from urban and suburban upgrades forces prices down;
• The authors strenuously avoid reviewing providers’ financial reports which show enormous profits even as costs continue their rapid decline;
• Many of the footnotes used to back their arguments turn out to quote self-interested parties like service providers, equipment manufacturers, and trade associations.

None of this is surprising or new in bought-and-paid-for-reports commissioned by companies to cheerlead their corporate agenda.  The last thing AT&T wants to read is a recitation of facts that disprove their arguments.

In essence, Shapiro and Hassett are arguing (with a straight face) that if providers are allowed to charge some consumers dramatically higher prices for broadband service, it will somehow convince them to upgrade their networks -and- trickle down lower prices for economically-challenged consumers.

Maybe if we let BP drill more oil wells in the Gulf, the extra profits they earn will somehow lead to better safety records for drilling and lower gas prices.  After all, with those record-busting profits earned over the past three years, the safety record for the industry is better than ever and gas is sold at fire sale prices, benefiting economically disadvantaged Americans, right?

If you or I argued this theory, we’d be drug tested.  For corporate lobbyists, it’s just another day at the office.

Here’s just how silly this really is:  You just discovered your hard drive is nearly full.  You’ve gone shopping for an upgrade, planning to spend around $100 for a new drive.  Just a few years ago, you spent around that much for a 120GB model.  Today, that same $99 would today buy you a 1.5 terabyte drive, unless you bought it from AT&T.  They want $1,500.

Newegg's price: $99.95 -- AT&T's price: $1,500

You: “Why is this drive so expensive?”

AT&T: “Over 90 percent of our customers never need a drive bigger than 120 gigabytes.  Developing a 1.5 terabyte drive costs plenty, and we feel that because you are a heavy user, you should bear the brunt of the development and manufacturing costs of all hard drives.”

You: “Sure, but this same 1.5TB drive is available in Korea for $99 dollars.  You want $1,500.  Why is there such a price difference and when does your price come down?”

AT&T: “Poor people in Korea and America can’t afford even a 60 gigabyte drive.  We are trying to make smaller drives more affordable  so in turn you should pay a higher price.  This isn’t about when AT&T will lower our price, it’s about when you will see our grand charitable vision and lower your selfish expectation of a lower price.”

You: “Wow, a corporation with socially-conscious pricing to benefit the poor?  So you are telling me that when I spend $1,500 on this hard drive, it is going to subsidize the cost of their 60 gigabyte drive, right?”

AT&T: “No, not exactly.  See, if we didn’t charge you $1,500, we’d have to raise the price on their 60 gigabyte drive and that’s not fair because they don’t need to store as much as you do.”

You: “But wait, your ‘subsidized’ 60GB drive costs three times more than what Koreans spend for a drive at least three times larger.”

AT&T: “That’s because the standard of living is different there.  Besides, why do you want to make the poor pay for your hard drive?”

You: “You aren’t making any sense.”

AT&T: “But we are about to make a whole lot of dollars!”

Dumping unlimited usage pricing only sets the profit expectations-bar higher for the broadband industry on Wall Street, regardless of what the true costs are to provide the service.  Wall Street never argues that excess profits should be spent on network upgrades and price subsidies to the poor — they want those profits paid to shareholders instead.

When the telecom industry is paying for your study, real facts never matter.  If you want them to do future business with your lobbying firm, the only acceptable conclusion is the one AT&T wants you to reach.

Tomorrow: Down the Sonecon rabbit hole

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Mark Lowenstein was a vice president of strategy at Verizon Wireless, where helped set pricing for the carrier.

The key to turning America into a haven for Internet Overcharging schemes is Re-educating customers to accept that unlimited ‘isn’t fair,’ especially in wireless mobile broadband.

Mark Lowenstein, an industry analyst and commentator, has given his prescription to Internet providers just itching to slap usage limits and overlimit fees on consumers enjoying unlimited broadband service:  you have to Re-educate consumers to accept Internet Overcharging schemes as a “positive” rather than a “punitive” development.

Fierce Wireless, where Lowenstein’s ideas were published, left out the fact he was also a senior executive at Verizon Wireless.

Despite the billions in profits earned from today’s broadband marketplace, some in the industry want to banish “unlimited” from subscribers’ lexicons.  Sure it’s true that many companies’ investments in broadband expansion and upgrades have actually declined in the last few years, right along with the costs to provide the service.  But in a world where revenues in other parts of the business are drying up, someone has to make up the difference — you.

For AT&T, the decision was easy.  If you want the raging-popular iPhone, you’re going to need a two-year service contract and a data plan limited to 2 GB of usage per month.  Exceed that at your financial peril (or use a Wi-Fi hotspot and stay off our 3G network).  Don’t like it?  Too bad for you.  Where else will you find a subsidized iPhone?

Now that AT&T has thrown down the smartphone cap gauntlet, Lowenstein is ready to offer carriers advice on how to make their abusive pricing schemes go down better with consumers.  He wants everyone to take a crash course in computer science. Grandparents everywhere will come to understand the meaning of megabyte and get into the habit of contemplating how many of those will be eaten from usage allowances everytime they use their phones.

A key part of the transition to usage-based pricing is going to be educating users and the app development community about what a “megabyte” is, as well as developing more advanced tools and the right early warning systems to ensure wireless operators don’t end up testifying before Congress for Bill Shock, Part 2. U.S. consumers are accustomed to flat-rate pricing in all other aspects of their connected life: landline phone, wireless voice (increasingly), cable, broadband and so on.

Lowenstein considers AT&T Usage Estimator to be “nifty,” missing the irony of his own declaration that AT&T’s nasty cap means “moderate usage of anything multimedia gets you to 2 GB pretty fast.”  AT&T, he notes, also helpfully notifies customers they are about to bust through AT&T’s subjective definition of an appropriate usage allowance.

He concedes there are some “gray areas” — mere minutiae in AT&T’s greater scheme for fatter profits:

• New generation multitasking smartphones can run apps and other bandwidth-consuming features in the background, sometimes simultaneously, leading to exponential increases in data usage;
• The model of the “constant connection” means apps in the background exchanging data over the mobile network 24/7 could consume plenty of data, or perhaps not.  Few know for sure;
• Consumers are forced to pay for spam, advertising, unwanted file transfers and attachments, and other data not specifically requested;
• Family plan users now need to track something else on AT&T’s website — how much data their kids are using.  Remember the wars over cell phone voice calling plan overages and text messaging?  Wait.

In Lowenstein’s world-view, this all represents opportunity.

Among his suggestions:

1. Add special ratings to apps that are highly consumptive of content.
2. Provide notification before certain content downloads or heavy usage apps.
3. Provide a view into other family plan users.
4. Provide the option for sponsored content and value exchange.

That last one may prove to be the most controversial at all.  It assumes the Kindle model — where the content producer builds in the price of network consumption.  That would make AT&T’s day — forcing content producers to cough up money to deliver content over the same network AT&T already charges customers to access.  Who would turn down being paid twice for the same thing?  Lowenstein’s model allows for advertisers to defray part of the costs:

An advertiser or sponsor could pick up some of the network cost. Or the content publisher could bundle the price of data into the app. Users are comfortable with the “choice” model in the TV world: view it for free on broadcast or Hulu, with commercials; pay a monthly fee for the DVR service and skip the ads; or pay a premium to view that content on-demand, commercial-free.

That suggestion benefits AT&T enormously, but does nothing for content producers who can’t even sustain themselves with advertising.  Lowenstein suggests they should now seek out advertisers to remunerate AT&T?  The implications of wireless carriers deciding who gets the usage-cap-exempt content deal and who doesn’t opens a whole new Pandora’s Box.  It effectively allows a handful of companies to pick the winners and losers in the mobile broadband marketplace.  After all, if AT&T offered free videos on its own video portal but didn’t exempt other websites with the same video content, guess where users will choose to watch.

Lowenstein believes taking these kinds of steps will somehow insulate the wireless industry from charges it’s barely competitive, restricts too much, and charges even more.  Yet usage limits like AT&T’s, coming even as carriers enrich themselves with gotcha add-on plans and extra fees will speak far louder than AT&T providing customers a guide on how to be abused by the wireless carrier just a little less.

I also think how usage-based pricing is handled in wireless will be closely watched in the wired broadband world. Consumers have become accustomed to flat-rate pricing for unlimited data from their broadband provider. But with the exponential growth of video consumption, and the notion of more TV and movie programming being downloaded from or streamed via the Internet, usage-based pricing for certain types of content or highly consumptive customers might be coming to a broadband neighborhood near you.

The “unlimited” ride might be coming to an end, but there’s an opportunity to implement it in a positive, rather than a punitive, manner.

In spite of Lowenstein’s love of telecom industry talking points (hardly a surprise considering he works for that industry), his notions that consumers will accept increasing broadband bills even as the level of service provided is reduced makes him not only wrong, but hopelessly out of touch.

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Time Warner Cable is offering mobile phone providers a solution to their clogged wireless networks — clog ours instead!

Business Week notes the cable company has been aggressively pitching its broadband network to cell phone companies in New York City, which can be used to transport cell phone calls and mobile data between cell towers and the providers’ operations centers.  The “backhaul” network cell phone companies rely on to move calls and data between the cell tower nearest you and your provider’s distribution network is often the source of the worst bottlenecks, especially when those networks are connected by standard copper telephone wiring, as many still are.

The more customers sharing a low capacity copper line, the slower your data speeds and greater the chance for dropped calls.  Although some providers have expanded their fiber capacity to reach busy cell towers, many more are still stuck with copper… until now.

Time Warner Cable’s offer to offload clogged cell phone networks onto the cable company’s broadband backbone has become extraordinarily profitable to the nation’s second largest cable operator.

In fact, it has become Time Warner Cable’s fastest-growing business after revenue tripled last year, Craig Collins, senior vice president of business services told Business Week.

We are talking $3.6 billion dollars in revenue in 2012 from wireless carriers alone, according to researcher GeoResults, Inc.

“Backhaul is a growth play that we are pursuing aggressively,” Collins said. “These mobile players want to get the bandwidth they need at a cost-effective price and our structure allows them to get that pretty seamlessly.”

U.S. smartphone use has grown almost 700 percent in four years, according to the U.S. Federal Communications Commission. Mobile-data volume is more than doubling annually as people use devices like the iPhone, BlackBerry and Google Inc.’s new Nexus One to send photos, watch videos and surf the Web. When networks jam, consumers face dropped calls and may find they can’t access Web pages or TV, analysts said.

The coming "exaflood" doesn't seem to worry Time Warner Cable, except when profits from consumers are at stake

Apparently the “exaflood” scare theory that suggests broadband networks are becoming hopelessly clogged does not apply to Time Warner Cable, because the company easily found plenty of free bandwidth in metropolitan New York City to profit from wireless phone traffic.

Not to be outdone, Comcast expects $1 billion from the wireless backhaul gravy train over time, according to its February 3rd conference call with investors.  Comcast is in a unique position to help ease congestion in San Francisco, where the cable operator provides service to some of the same customers who wander the city with Apple iPhones on AT&T’s overclogged Bay Area network.

Time Warner Cable CEO Glenn Britt doesn’t want to limit the potential revenue to just the wireless big boys — he wants to offer service to carriers large and small:

While Time Warner Cable declined to specify if AT&T, the lone U.S. carrier for the iPhone, is a customer, the New York- based cable company says it wants to sign carriers large and small. Chief Executive Officer Glenn Britt alluded to AT&T’s extra iPhone traffic in a December conference call.

“They want to get that into a cable as fast as they can,” Britt said, referring to overloads. His company began leasing backhaul in 2008 and posted $26 million in sales last year, less than 1 percent of the company’s total sales. Collins declined to give a forecast for 2010.

All this, of course, comes ironically to those Time Warner Cable customers who were subjected to Internet Overcharging experiments from Time Warner Cable just about one year ago.  Apparently, the exaflood only applies to consumers who face enormous broadband pricing increases and/or usage limits because of “overburdened” broadband networks.

Not so overburdened that the company can’t make room for billions in new earnings from cell phone companies, of course.

Click here to view the embedded video.

[Video Fixed!] Craig Moffett discusses wireless smartphone data usage trends and Time Warner Cable’s involvement in transporting mobile phone and data across its cable broadband network (5 minutes)

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Mark Cuban

Mark Cuban has once again entered the debate over online video, Internet Overcharging schemes, and giant corporate mergers… and mangled it.

Cuban, who owns HD Net as well as the Dallas Mavericks basketball team, occasionally presents cable industry talking points on his blog, but quickly gets into trouble when he strays from them.

This time, Cuban is annoyed with Sen. Al Franken (D-Minnesota) over remarks the senator made about the proposed Comcast-NBC merger.  Cuban seized on comments by Franken that Comcast should put all of its television programming online.  Doing that, Cuban insists, would lead to higher prices for broadband and usage caps on it.

Where has Cuban been?  I realize the man is too wealthy to worry about the relentless rate increases Comcast and other companies force on consumers every year, but he also forgot Comcast already has a usage cap on its service, even before the feared video tidal wave arrives.

I get that no one really cares if Comcast has to spend money on capital improvements to add bandwidth to the home.  They should. Its pretty damn stupid to push consumption in a direction that will raise internet rates  to receive the same content for which there is already a phenomenal digital network in place to deliver that content.

Think about it for a minute Senator Franken. Comcast, and every large TV Provider has a digital network in place that can and does deliver gigabits of tv content perfectly,  every second of every day, to any TV set in any  home that is connected to their network. It works. Well.  What you are asking Sen Franken, is that Comcast duplicate the delivery of theirs and NBCUniversals shows on a network, the internet,  that is not, and has never been designed to handle the delivery of huge volumes of video and tv shows.

Cuban should be arguing that point with the cable industry.  TV Everywhere, the online video platform that will offer consumers access to “hundreds of TV shows and cable programming,” is their invention.  If Cuban’s fears are correct, why would the nation’s largest cable operators launch such an ambitious online video platform?

Cuban has bought into industry propaganda justifying usage caps.  There is always an excuse for rationing broadband service to boost profits.  First it was file sharing, now it’s online video causing the “serious problem” of customers using broadband service for more than just e-mail and web browsing.  Their solution – monetize it.  Usage caps and usage based billing are about preserving high profits, not protecting or increasing network capacity.  TV Everywhere proves that.

Franken does not advocate usage caps, as Cuban suggests.  The senator simply wants to be certain Comcast cannot act as a gatekeeper, determining who gets access to Comcast-NBC programming, and who does not.

Cuban should be welcome to such measures as a victim of Gatekeeper Abuse himself.  Mark, how many subscribers did you lose nationwide when Time Warner Cable unilaterally pulled the plug on your channels?

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Phillip "My Essay Would Never Get Accepted" Dampier

Wonder where Time Warner Cable is spending this year’s rate increase?  Look no further than Time Warner Cable’s all-new Research Program on Digital Communications.

For a 25-35 page essay on the topics that interest Time Warner Cable’s lobbying and Re-education campaigns, the cable operator will fork over a whopping $20,000 “stipend.”

Why?  They get to use an ostensibly “independent” researcher from a major university or non-profit group to promote their agenda with the veneer of credibility.  It’s not Time Warner Cable that suggests Internet Overcharging schemes are warranted — it’s this researcher guy from a respected university who said so.  Net Neutrality should be opposed not because we have a vested interest in doing so, but because this non-profit group catering to a minority or disadvantaged group says it will harm their members.

Copies of the “dollar-a-holler” essays get spread around Washington to influence public policymakers and other legislative movers and shakers, and inevitably become talking points in the public policy debate.  Long forgotten is who paid for them.

What kinds of questions does Time Warner Cable want answers to?

• How are broadband operators coping with the explosive growth in Internet traffic? Will proposed limits on network management practices impede innovation and threaten to undermine consumers’ enjoyment of the Internet?
• How can policymakers harmonize the objectives of preventing anticompetitive tactics and preserving flexibility to engage in beneficial forms of network management?
• Regarding these issues, describe a vision for the architecture of cable broadband networks that promotes and advances innovation for the future of digital communications.
• How might Internet regulations have an impact on underserved or disadvantaged populations?

See below for my exclusive tips and strategies to help would-be applicants succeed in getting their essay proposals approved!

Some companies have paid stipends to researchers to consider market trends, new product possibilities, and be on top of the next biggest thing.  This isn’t that.

This “research program” is being overseen by Fernando R. Laguarda, Vice President, External Affairs and Policy Counselor at Time Warner Cable.  Laguarda joined Time Warner Cable last April from Wiltshire & Grannis LLP, a boutique law firm involved in telecommunications policy strategies as part of its practice.  The firm describes, among its strengths, a “first-rate understanding of the law and policy with a keen understanding of the political and public relations forces that shape public policy battles to help fashion innovative, winning strategies.”

Time Warner Cable admits he’s there to help Time Warner re-educate lawmakers and the public about Time Warner Cable’s agenda.  From their press release announcing his hiring (underlined emphasis ours):

Laguarda will play a significant role in helping the company develop and advance its policy positions, and will assume primary responsibility for working with third party policy influencers, including think tanks, academics, public interest and inter-governmental groups, and diversity organizations.

“Fernando is an accomplished attorney who comes to Time Warner Cable with a unique mix of experiences and he will bring a fresh perspective to the many policy issues we will be addressing,” said Steven Teplitz, Senior Vice President, Government Relations, adding “he knows our business extremely well and will play an essential role in helping to advance Time Warner Cable’s advocacy agenda.”

Time Warner Cable is taking a page from Verizon and AT&T, who back research “think tanks” and have contributed heavily to organizations that suddenly declare a burning interest in their corporate policy agendas.  Take a look at Broadband for America’s member roster for a review of how that game is played.

Time Warner Cable customers are probably wondering why they are paying for this.  After all, $800 a page for essays that “will provide new information, insights, and practical advice” is mighty pricey.

Ordinary consumers are not invited to apply.  Had we, my essay proposal would have been, “Time Warner Cable Should Stop Wasting Customers’ Money on Bought-And-Paid-For Essays and Instead Use the Money to Upgrade Their Network.”  I was even planning on including some nice graphs and charts and stuff.

I would remind the nation’s second largest cable operator it earns billions from selling broadband.  Instead of blowing $20k-an-essay down a Washington public policy rathole, it could instead spend it on solving their burning network management issues with simple, cost-effective upgrades that deliver better service to customers.

Since I don’t qualify — I’m just a Time Warner Cable customer, what do I know, I’ll be a giver and not a taker and share free advice with would-be applicants.

1. Since Time Warner Cable doesn’t want a breakdown of your expenses or need to know what you are going to do with the $20k, you are going to spend most of your time and effort first learning what policy positions the cable company wants you to parrot in order to improve your chances of being a big winner.  Remember, Time Warner isn’t going to give you the whole 20k upfront.  According to their FAQ, one half of the award ($10,000) will be issued at the start of the project.  The second installment ($10,000) will be made only after your advocacy essay is delivered.  There’s a built-in incentive to tow the line.

2. You can’t write on just any topic.  You have to write about one of the company’s pre-selected topics, which is why I’m out of the running for this already.  If you’ve been paying attention to the policy debates about Internet Overcharging, Net Neutrality, and Network Management, you are already half-way there!  You know what side of the issue the cable company is on, so don’t blow your chances by saying things like “a free and open Internet should never discriminate against the traffic carried on it,” or “at a time when the broadband industry earns billions in revenue and recently increased rates for customers again, the idea of implementing usage limits or usage based billing would make Tony Soprano awe at its audaciousness.”

Polly wants a stipend

(Statements in green keep you in the running.  Statements in red will likely get your proposal introduced to the circular file.)

• Reputable equipment manufacturers predict Internet growth so great, it threatens a vast “exaflood” which could bring the Internet to its knees.  Without wise network management and traffic control measures, just like those used on any big roadway, a cataclysmic global traffic jam is inevitable.
• Network Neutrality should be a given for any provider because no company wants to make money by slowing down someone’s content.  That would be like extortion — pay us or we put the brakes on you.
• Network management techniques guarantee your call from grandma will be crystal-clear, your movie download from your cable-partnered movie service will always play worry-free, and by organizing online traffic, Internet chaos is reduced.
• There is nothing wrong with cable companies colluding with one another to preserve the industry’s flexibility to manage its own traffic, even if it means putting some questionable, independently-owned traffic at the back of the line.  Nobody wanted to view that anyway.
  
• Today’s cable broadband provider is investing billions of dollars to improve network capacity and deliver customers an unparalleled online experience.  The cable industry has pioneered innovation in cable network programming they own, operate and distribute to assure quality and excellence.  Now, by taking that same formula for success to online content, and cutting out unnecessary middlemen, the industry can do for broadband what it created for cable television.  Now that’s a win-win for everyone!
• Internet regulations have unintended consequences.  It means providers have to funnel large contributions to interest groups, or place a company employee on a group’s advisory board, so that the industry can rest assured that groups with an interest in maintaining valued contributions will advocate anything we ask, starting with “these regulations are bad for our groups and our members.”
• Unnecessary Internet regulations will create widespread depression and anxiety for investors.  That means money to expand broadband availability in underserved or unserved communities will dry up faster than the Mojave Desert.
• If the cable industry doesn’t get its way on this, it will punish consumers like the credit card industry did after “credit card reform.”  Word to the wise.

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For months now, several groups purporting to represent the interests of minorities have busily been attacking Net Neutrality as beside the point for the poor and unserved consumer who has been left out of the broadband revolution.  To varying degrees, several of these groups have been spouting broadband industry talking points to the Federal Communications Commission, members of Congress, and the public at large.

For them, and the profitable broadband industry they indirectly represent, providing access at affordable prices is much more important than making sure providers don’t lord over the network they provide to customers.

Access vs. Openness

Consumers are perplexed by this either/or proposition.  For us, both issues are vitally important.  In urban, income-challenged areas, affordability is a crucial issue.  In rural areas, access to anything resembling broadband comes before worrying about the price.  For all concerned, making sure the Internet is not subject to corporate content control, either through direct censorship or through the far-more-common practice of pricing and policy controls, is just as important.

Providers have their self-interest on display when they promote broadband expansion — they want to receive the public dollars available from the broadband stimulus package to pay for that expansion.  Of course, every step of the way they have their fingers all over the process, from broadband mapping that protects incumbents from potential competition, defining what constitutes broadband to be as slow and as cheap to provide as possible, to implement usage rationing through Overcharging schemes like usage limits and usage-based billing, and to advocate for public policy that keeps the Money Party of fat profits running as long as possible without oversight.

The entry of minority interest groups into the debate is nothing new.  Groups of all kinds, including many who one would think wouldn’t have an opinion on Net Neutrality, are all part of the discussion.  Debates ensue, statements are fact-checked, back and forth discussion ensues.  What disturbs me is the small handful of groups who are willing to deal the race card when their own views and statements are challenged and they are threatened with losing the argument. Ill-equipped to argue the merits of their case in detail and withstand the scrutiny of fact-checking, some have introduced race into the debate to obfuscate the issues.

While I don’t doubt their sincerity and passion advocating for increased access and affordability, too many of these groups hurt their own case by accepting generous contributions (or advisory board members) from the telecommunications industry.  Consumers who witness the near total alignment of views between these groups their corporate benefactors are right to be concerned.  Many are asking if those views represent true conviction or “a dollar a holler” advocacy.

The Black Agenda Report, which created this graphic, ponders the same questions many consumers are asking

As Stop the Cap! documented just a few months ago, Broadband for America is a great example of industry-funded astroturf in action.  Large numbers of groups with no apparent connection to the broadband policy debate have found their way onto the roster of members.  From a cattle association to a Native American group that also has a burning interest in sharing their views about corporate jet landing rights, the one thing in common with virtually every last one of them was a financial contribution and/or board member working for big cable or telephone companies.  Thus far, debating a cattle association has not brought charges of being anti-cow, although I suspect consumers are anti-bull.  Debating the merits of Net Neutrality with Native American groups has not brought charges of anti-Native American bias.

Stop the Cap! itself has been on the receiving end of racial rhetoric offered by one of the anti-Net Neutrality advocates out there, Navarrow Wright.  Wright is a former corporate executive at Black Entertainment Television, and spends his days now as a self-proclaimed social media and branding expert. Last year, after exiting as CEO of Global Grind, a hip hop social network, Wright launched Maximum Leverage Solutions, which claims to be a full service consulting firm specializing in social media strategy and Internet Consulting.

Just a few months later, Wright suddenly discovered a big interest in the concept of Net Neutrality.  While he doesn’t disclose his client list, would it surprise anyone if a telecommunications company hired his services for their own “social media strategy?”

Since last fall, Wright has been generating a mix of provider talking points, Google bashing, and attacking groups that support Net Neutrality.  He’s called supporters of an open Internet “digital elites,” the FCC a player of “dangerous games” by ignoring the anti-Net Neutrality public, Free Press a group that wallows “in crazy claims and race-dividing rhetoric,” and tries to connect support for Net Neutrality as somehow representing opposition to increased broadband adoption.

Challenging and debunking his talking points isn’t difficult — they are precisely the same ones the broadband industry has used for several years now.  We invited Wright to a full, in-depth discussion about the merits of Net Neutrality and broadband adoption.  We even got the discussion started, but that’s exactly where it ended.

Wright is also incredibly defensive about the issue of industry-backed mouthpieces and astroturf efforts in general.  Suggesting Wright’s views are inaccurate brings his resume in response, which I suppose was designed to impress readers with suggestions of his built-in expertise, belied by his silence on these issues prior to last year.  In Wright’s original comment, he took our comments about economically disadvantaged Americans and made it an issue of color:

Our piece:

The letter represents the groups’ concerns that broadband for many in America is simply not available, especially for the economically disadvantaged.  They’ve been swayed by industry propaganda to characterize Net Neutrality as a threat to addressing the digital divide by making service ultimately even more expensive.

His response:

Phil, I know (at least I hope) your intent wasn’t to suggest that people of color have been “swayed by industry propaganda” and aren’t capable of thinking for ourselves on technology issues.

James Rucker, executive director of Color of Change added to the debate in late January, wondering why some civil rights groups are only too willing to support discredited industry talking points and advocate against Net Neutrality.

Rucker discovered the same thing we did.  Challenging these groups to explain their positions brings forth repetitious inch-deep talking points and total silence when a rebuttal is offered.  If pushed, they obfuscate with claims their views are being disrespected, when in reality they are only being fact checked.  Perhaps inconvenient, and even slightly embarrassing, but it’s completely appropriate for consumers to ask whether a conflict of interest exists when a group advocates for the positions of the same industry that is sending them big contributions.

The risk, of course, is to tie an organization’s good name to demonstrably false provider propaganda that some groups are willing to repeat, nearly word for word.

Take for instance Wright’s claim that Net Neutrality will force providers to spend money they would otherwise invest for the benefit of the rural, the downtrodden, and the unserved:

That brings me to the other corporate interests: the Internet service providers. It is the ISPs who must invest in, upgrade, maintain and build out the networks that allow us to receive these cool applications. While I don’t find the network side as sexy as the content side, I do know that we have to have it and ISPs need capital to build and maintain it. So the question remains who is going to pay for maintenance and upgrades to the network if Google gets a free ride? Basic economics tells us that if government requires ISPs to give Google a free ride, there’s only one other place to look for the money: consumers like you and me. What’s more, there are those who want to make it even more unfair by insisting that your big-bandwidth-using neighbor should not have to pay more than you, even if all you want to do is check email and watch some YouTube. Who will all of this hurt the most? Low-income consumers.

The only color that really matters here is green

Wright doesn’t know his American telecom history.  Let’s discuss this fiction:

1. Bruce Dixon, a writer for the Black Agenda Report says it better than anyone: “Phone companies invented the digital divide more than a century ago as their core business model, preferring to extend service to affluent areas where they could levy premium charges, rather than building networks out to reach everybody.”  The cable television industry “franchise” requirement came as a direct result of cable industry redlining, the practice of wiring wealthy neighborhoods for cable while bypassing urban and rural areas deemed “unprofitable.”  It’s the same story for broadband, and Net Neutrality is beside the point.  The number crunchers look for Return On Investment (ROI) when considering who gets on the right side of the digital divide.  If they can’t make a killing on you, they’re not going to provide you service.  If you can’t afford their asking price, which is increasing regardless of Net Neutrality, why serve you?  Ultimately it is consumers who overpay for these networks, priced well above cost, generating literally billions in profits.  Why ruin a good thing with altruistic broadband expansion at a fire sale price?
2. Regardless of what Google is doing, providers are seeking new ways to further monetize broadband service, enriching themselves even further.  Prices go up even as the costs to provide the service go down.  The old chestnut about the next door neighbor being a usage piggy is just more of the same “us vs. them” propaganda from providers who want consumers to fight amongst themselves while they run to the bank with the money.  Grandma doesn’t want her broadband service limited either, and she’s way too smart to believe a provider promising dramatic savings for less service from companies that jack up her rates year after year.
3. The best way to guarantee affordable access to broadband service is to develop a national broadband plan that provides the same kinds of “lifeline” services already available for economically disadvantaged phone customers, legislative policies that force markets open to additional competition, government oversight to ensure providers are required to provide service throughout their respective service areas, and stimulus or Universal Service Fund assistance for projects that assure access to those who simply will never pass ROI tests.  Or we can solve everything by not passing Net Neutrality?  Please.
4. Google doesn’t have a free ride.  First, consumers -pay- providers for connectivity.  Ultimately, they are the customers — content producers are not.  Nothing prohibits an ISP from offering hosting services to content producers at competitive prices.  If Google, Amazon, Netflix, or Hulu want to host their content on servers owned by Verizon, Comcast, Time Warner, or AT&T, nothing stops them.  Google pays for its own connectivity to the Internet.  Customers pay for accessing it.  Now providers want to get paid again.  It’s like triple-charging for snail mail – you pay for a stamp to mail it, the person you wrote pays to receive it, and the airline that flew the letter cross country has to pay to transport it.

Remember, it’s the content that drives broadband adoption. ISP’s honestly don’t fret as much about traffic as they claim.  They just care whether they can own it, control it, and profit from it.  The evidence to back this up comes from cable and phone companies in a big hurry to stream video content over their TV Everywhere projects.  Nothing consumes bandwidth like online video, yet there they are enthusiastically embracing it.  They have to, because if they don’t control it, it could eventually lead to people dropping their cable TV subscriptions in favor of online viewing.

Wright’s blog promotes another industry favorite — the dreaded phony “exaflood” which threatens to bring chaos and disorder to our online world… unless we totally deregulate broadband and let them do whatever they want to “solve it.”  That’s more of the same.  We’ve seen the results of that for more than a decade now, and the very digital divide that Wright complains about comes as a direct consequence to letting broadband providers serve, or not serve customers as they please at the prices they want.

Wright and other civil rights groups can throw as many race cards as they like against consumers who see right through their corporate-backed agenda.  That’s because consumers know Net Neutrality isn’t an issue of black or white.  The only color that really matters here is green.

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Google plans to offer up to 1Gbps service on its direct to the home fiber network

Google has announced it is doing something about anemic, overpriced, and poorly supported broadband service in the United States.  It’s going to start providing service itself.

In a move that is sure to drive providers crazy, Google is looking for your nominations for communities that are stuck in broadband backwaters, desperate for an upgrade.  With so many suffering from “good enough for you” broadband speeds, threats of “inevitable” Internet Overcharging schemes like usage limits and consumption billing, or customer support that involves reaching more busy signals than helpful assistance, they won’t have to beg for nominations.

Google is planning to launch an experiment that we hope will make Internet access better and faster for everyone. We plan to test ultra-high speed broadband networks in one or more trial locations across the country. Our networks will deliver Internet speeds more than 100 times faster than what most Americans have access to today over 1 gigabit per second, fiber-to-the-home connections. We’ll offer service at a competitive price to at least 50,000 and potentially up to 500,000 people.

From now until March 26th, we’re asking interested municipalities to provide us with information about their communities through a Request for information (RFI), which we’ll use to determine where to build our network.

I can think of a few cities that were victimized by providers in 2009 who have little chance of seeing true fiber optic service any other way.  Rochester, New York, the Triad region of North Carolina, parts of San Antonio and Austin bypassed by Grande Communications’ fiber network, are all among them.  Rochester has the dubious distinction of being stuck with two providers itching to slap usage limits and consumption billing on their customers – Frontier and Time Warner Cable.  Since Verizon FiOS is popping up all over the rest of New York State, residents in the Flower City concerned about being left behind might want to make their voices heard.

Google plans to deliver 1Gbps… that’s a Gigabit — 1,000Mbps service to its fiber customers at a “competitive price.”

While some in the industry consider such speeds irrelevant to the majority of consumers, Google thinks otherwise:

In the same way that the transition from dial-up to broadband made possible the emergence of online video and countless other applications, ultra high-speed bandwidth will drive more innovation – in high-definition video, remote data storage, real-time multimedia collaboration, and others that we cannot yet imagine. It will enable new consumer applications, as well as medical, educational, and other services that can benefit communities. If the Internet has taught us anything, it’s that the most important innovations are often those we least expect.

What’s in it for Google?  Targeted advertising, guaranteed open networks, an improved broadband platform on which Google can develop new broadband applications, and calling out providers’ high profit, slow speed broadband schemes are all part of the fringe benefits.

For providers and their friends who have regularly attacked Google for “using their networks for free,” Google’s fiber experiment deflates providers’ hollow rhetoric, and could finally provide a warning shot on behalf of overcharged, frustrated consumers that the days of rationed broadband service at top dollar pricing may soon be over.

Click here to view the embedded video.

Google released this video announcing their Think Big With a Gig campaign (1 minute)

This isn’t Google’s first experience with being an Internet Service Provider.  The company has experimented with free Google Wi-Fi service in its hometown of Mountain View, California since 2006.

[Update 2:30pm EST: FCC Chairman Julius Genachowski applauded Google's experiment: "Big broadband creates big opportunities," he said in a statement. "This significant trial will provide an American testbed for the next generation of innovative, high-speed Internet apps, devices and services."

The Washington Post has a source that claims Google "doesn't currently have plans to expand beyond the initial tests but will evaluate as the tests progress."  That could mean the experiment also serves a public policy purpose to re-emphasize Google's support for Net Neutrality, and to deflate lobbyist rhetoric about Google's support for those policies being more a case of their own self-interest and less about the public good.  If Google can run its networks with open access, they essentially put their money where their public policy mouth is.]

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Comcast's new usage gauge

Broadband Reports noticed Comcast’s usage meter has broken out of its limited trial in Portland, Oregon and customers are receiving notices across the Pacific Northwest noting the company’s usage meter is now available for their ‘convenience.’  But remarkably, Comcast has told 99 percent of their customers they “do not need to check the usage meter” because they won’t be close to the company’s 250GB limit:

We are pleased to announce the pilot launch of the Comcast Usage Meter in your area. This new feature is available to Comcast High-Speed Internet customers and provides an easy way to check total monthly household high-speed Internet data usage at any time. Monthly data usage is the amount of data, such as images, movies, photos, videos, and other files that customers send, receive, download or upload each month.

Comcast measures total data usage and does not monitor specific customer activities to determine data usage. The current data usage allowance for the Comcast High-Speed Internet service is 250GB per month. This means that the vast majority of our customers – around 99% currently – will not come close to using 250GB of data in a month, and do not need to check the usage meter.

That leads to two questions: Why would a company make an effort to produce a meter that is irrelevant to the vast majority of customers, and why institute a usage cap at all if only one percent of customers come close to exceeding it?

The answer, of course, is that most customers won’t need to worry about the limit today, but tomorrow is another matter.

As more broadband users begin watching video over Comcast’s broadband service, they will come perilously closer to the fixed limit Comcast offers — a limit that protects Comcast’s cable television package from customers switching to broadband-based viewing.

Bandwidth Hog? One customer consumed 897GB last November... using a backup method Comcast itself recommends to customers

Once Internet Overcharging schemes get their foot in your door, it’s usually only a matter of time before they force their way in and start looking for your checkbook.

Would Comcast seek to eventually lower today’s 250GB limit?  Perhaps, but there is no evidence of anything imminent.  It has been done before in Canada and sold as a “money-saver,” offered with an “insurance policy” Bell had the chutzpah to suggest “protected” customers from overlimit fees.  Monetizing broadband use is a hot topic for providers seeking enhanced revenue from their broadband divisions.  Time Warner Cable tried to convince customers it would tie revenue earned from its own Internet Overcharging experiment into expansion of their local broadband networks.  That was proven blatantly false when upgrades commenced in areas never part of “the experiment,” while those that were have been bypassed for DOCSIS 3 upgrades.

Some might believe such limits protect providers from dreaded hordes of malicious “bandwidth abusers,” a broadband urban legend comparable to the Cadillac-driving welfare queens we heard about in the 1980s.  In truth, the handful of so-called “abusers” have quietly been dealt with under the terms of existing Acceptable Use Policies for years without inconveniencing the vast majority of customers with arbitrary usage limits.  But the industry-sponsored narrative persists, usually in the form of some neighborhood hacking teenager sucking your bandwidth dry and costing you money.

What constitutes “excessive” or “fair” use ludicrously ranges from Frontier’s infamous 5GB usage allowance to Comcast’s 250GB limit.  Every company insists their limit is the fairest and that 99 percent of customers won’t exceed it, no matter what it is.

Are there consumers moving a lot of data across Comcast’s network?  Yes.  One Broadband Reports reader in Spokane posted a usage report showing a whopping 897GB of consumption in November.  Was he running a torrent client swapping an illicit copy of Avatar with people all over the world?  Was he downloading lots of illegally obtained music and movies?  Was he running a commercial business on a residential connection?  No.  It turns out he was retrieving a backup to restore data from a failed hard drive.  In fact, Comcast recommends customers use online backup services, and even provides customers with a free, limited version of Mozy, which includes an easy path to upgrade to much larger storage plans.

Even Comcast doesn’t believe in the usage-limits-solve-congestion meme. In response to a query from IP Democracy back in February, 2008:

“Most [ISPs] recognize that a metered approach doesn’t solve peak-hour usage pressures.”

But it will do wonders for a provider’s bottom line.

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Robert F. McDowell

Two Republicans serving on the Federal Communications Commission told attendees at Saturday’s Tech Policy Summit that “usage-based pricing” for wireless broadband could be a solution to congested cell phone data networks.

“Pricing freedom has to be essential, because a small number of users take up the majority of bandwidth. So charging some of the heavy users for that bandwidth makes sense,” Commissioner Robert McDowell said during a panel discussion at the 2010 Consumer Electronics Show.

“I think it’s time to let that happen,” he added. “Net neutrality proponents say it should be an all-you-can-eat price. But that will lead to gridlock.”

The discussion, Inside the FCC’s Communications Agenda, focused on the FCC’s agenda in light of the Obama Administration’s new policy initiatives and the current the impact technology has on regulatory policy.

McDowell was responding to industry reports that Verizon was prepared to abandon all-you-can-eat pricing for wireless data on its forthcoming 4G LTE wireless network, even though it doesn’t actually have such a plan in place at the time the panel discussion was held.

McDowell believes that since private money is constructing the networks capable of delivering LTE service, the company has a right to charge what it pleases for service, reducing demand with a correspondingly higher price for those who use the network more than others.

Meredith Atwell Baker

Consumer advocates argue that current profits in the wireless industry provide ample resources to build and upgrade networks without overcharging consumers with expensive usage based pricing designed to make customers think twice before using the service they pay good money to receive.  Unlimited use pricing is favored by consumers as well.  Most providers abandoned “all you can eat” plans at least a year ago.  Every wireless broadband plan carries some limitations somewhere in the fine print, particularly for plans that are designed for mobile netbooks or laptops.  Virtually all of them either limit usage to 5GB per month or throttle the user who exceeds that amount down to dial-up speeds for the rest of the month.

Meredith Attwell Baker, the newest Republican FCC Commissioner, seemed slightly out of her element in discussing the issue of consumption billing.

As panel moderator Kim Hart reported for The Hill newspaper, Baker has some novel ideas for easing congestion on wireless broadband networks.

“Maybe we move back to a world where people pay for roaming,” she said.

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A new report from Frost & Sullivan (pricey subscription required) warns wireless broadband providers may have to implement limits on the amount of data consumed by customers, a surprising result considering the vast majority of carriers already do.

The business research and consulting firm says some wireless carriers are struggling to balance the consumption they encouraged with the physical capacity of their networks.  Citing AT&T’s iPhone and its data-rich App Store, which lets consumers download data applications to run on their phone, the research shows data consumption has increased dramatically as consumers integrate smartphones into their daily lives.

“We all knew as an industry that mobile data would grow, and we saw these growth curves that were a 45-degree angle upward,” said James Brehm, senior consultant at Frost & Sullivan. “But the true growth of the iPhone, when you chart it, looks more like a hockey stick.”

The demand for data is pressuring the industry to invest additional money for upgrades, and Wall Street isn’t happy with a trend that guarantees expensive upgrades will be required to meet customer demand — upgrades that would come straight out of revenue, unless a dramatic shift takes place towards consumption-based billing.

“You’re going to see some push back from consumers, but AT&T’s not going to be the only one that’s going to have to do this,” Brehm said. “Every service provider out there is going to ultimately change the way mobile data is consumed and priced over the next few years.”

The argument essentially comes down to how much revenue wireless carriers will be forced to invest in their networks, and how much noise they will hear from investors for doing so.  Wall Street prefers customers pay the costs for upgrades by increasing prices for data service, which would assure revenue expectations remain stable.  Customers demand wireless carriers invest some of their profits back into their networks to improve service and in return enjoy customer loyalty and any revenue earned from selling additional services.

Some carriers are choosing to stay out of the fight, claiming they already have sufficient capacity to serve customers.  Besides, most of them already have usage limits on their services, traditionally set at a maximum of 5GB of consumption per month.

T-Mobile believes it already has enough capacity to meet the growing demand from data-hungry smartphones.  It has invested in new technology that claims to triple current 3G speeds and works with current 3G phones,  meaning customers don’t have to buy a new phone to enjoy the faster speeds.

Sprint is constructing its 4G network and already sells service in several cities through Clearwire.  Sprint claims unlike some of its competitors, it intends to stay ahead of the growth curve by investing now in additional spectrum and technology to manage its networks.  Sprint claims it has plenty of room to expand capacity.

Verizon Wireless says it has more consistently upgraded its network over the past decade than any other carrier, and is well prepared to accommodate even the iPhone.

“We have put things in place already,” Verizon Wireless Chief Technology Officer Anthony Melone tells Business Week. “We are prepared to support that traffic.”  Next year, the nation’s largest wireless carrier will be rolling out 4G upgrades in America’s 30 largest cities, although primarily for mobile broadband service accessed through a mobile broadband dongle.

Verizon already limits consumption on its wireless plans to a maximum of 5GB per month, with overlimit penalties for those that exceed it.

Most of the attention remains focused on AT&T and the iPhone, because the data plan provided for iPhone customers does not carry a specified limit.

Vipin Jain, chief executive of Retrevo, a consumer electronics shopping Web site told the Chicago Tribune, “As soon as you put a cap (on data usage), there’s going to be a backlash.”

So what keeps wireless providers from upgrading their networks and keeping consumption billing and usage caps away?

In addition to pressure from Wall Street, another Frost & Sullivan report points to an unsettled marketplace.  The progression towards 4G has been stalled because of the economic downturn, the report says.

Frost & Sullivan ICT Program Manager Luke Thomas says carriers are still waiting for consensus on several issues, including support for voice and SMS and a harmonized frequency band for 4G traffic.  Thomas also says many cell towers have limited capacity to support additional traffic.  A tower can deliver only as much data as its connection back to the provider’s network can handle.  Once the “backhaul” link is saturated, calls start to drop and data speed slows.  Many still rely on dedicated, relatively slow copper wire circuits, although fiber optic links are becoming increasingly common.

Thomas also believes carriers will need additional spectrum, a minimum of 20MHz, to make 4G upgrades worthwhile.

Without all of these factors, Thomas believes the potential return on investment won’t be high enough to justify moving forward any time soon.

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Apple iPhone

AT&T Mobility, the still-exclusive provider of Apple’s iPhone in the United States, is floating trial balloons about the imminent end of “unlimited data” plans for iPhone customers.  Although the company has always defined their wireless broadband service as “unlimited” even though the fine print says they really mean “up to 5GB of usage per month,” the mandatory data plan forced on iPhone customers has retained its “unlimited means unlimited” definition.  We’ve never verified a customer thrown off of AT&T’s network for using too much data on their iPhone.

AT&T has managed the iPhone as both a success story and a major challenge to its network.  People will go to all sorts of trouble to acquire and keep an iPhone, including putting up with less 3G coverage and more congestion-related dropped calls and other service problems in some larger cities.

Considering the enormous revenue boost the iPhone has brought to AT&T, customers might wonder why the company simply doesn’t pour additional money into building more network capacity.  AT&T Mobility CEO Ralph de la Vega doesn’t agree.

He believes the answer isn’t going to be found in just upgrading AT&T’s network.  Instead, he wants to implement an Internet Overcharging scheme like consumption billing and do away with the “unlimited” plan altogether.

AT&T claims that three percent of smart phone customers consume 40 percent of network capacity, a substantial percentage if compared with the amount of data a mobile broadband dongle can help a laptop or netbook consume.  Of course, those numbers are AT&T’s and do not come with independent verification.

For de la Vega, consumption pricing “is inevitable.”  That allows AT&T to reduce demand on its network and manage upgrades at a level more comforting on that quarterly financial report.

“What’s driving [high] usage are things like video or audio that plays around the clock,” de la Vega said at an analysts conference. “We have to get to those customers and get them to recognize they have to change their patterns, or there are things we will do to change those patterns.”

Customers forced to ration their usage with the threat of a higher bill can work… for AT&T.

AT&T may be about to test the limits of the iPhone enthusiast.  After all, they’ve already been pushed into a two year contract for a premium-priced phone, enrolled in a high priced service plan with a compulsory data package add-on, and have to live with AT&T’s less-than-stellar coverage in several areas.  Will AT&T be able to punish its customers further by taking away their unlimited data plan and replace it with consumption billing and see if they’ll break?

We’re likely about to find out.

AT&T wants to embark on a part-conservation, part-education campaign to get customers to reduce usage.

“We need to educate the customer … We’ve got to get them to understand what represents a megabyte of data,” de la Vega says. “We’re improving all our systems to let consumers get real-time information on their data usage.”

That’s the AT&T version of the gas gauge, the usage meter that means more profits for them and less service for you.

A question customers might want to ask Apple and AT&T: If the sole provider of the iPhone in the United States is a hard luck case of an over-congested network and an inability to invest profits to expand it, perhaps it’s time that exclusive contract comes to an end, allowing other mobile providers to ‘share the burden.’  Then customers can decide if AT&T’s rationing, consumption billing, and education campaign is right for them.

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Phillip "He Who Shall Not Be Named" Dampier

I’ve tangled with Todd Spangler, a columnist at cable industry trade magazine Multichannel News before.  This morning, I noticed Todd suddenly added me to the list of people he follows on Twitter.  Now I see why.

Todd is back with another one of his cheerleading sessions for Internet Overcharging schemes, promoting consumption-based billing schemes as inevitable, backed up by his industry friends who subscribe and help pay his salary and a guy from a company whose bread is buttered selling the equipment to “manage” the Money Party.

GigaOm’s Stacey Higginbotham and Broadband Reports’ Karl Bode don’t pay his salary, so it’s no surprise he disagrees them.  Oh, and I’m in the mix as well, but not by name.  Amusingly, I’m “the StoptheCap! guy, who’s making a career directing his bloggravation at The Man.”

Todd doesn’t consider himself “an edgy blogger type because, as everyone knows, I am The Man,” he writes.

Actually, Todd, you are Big Telecom’s Man, paid by an industry trade magazine to write industry-friendly cozy warm and fuzzies that don’t rock the boat too much and threaten those yearly subscription fees, as well as your paid position there.  I’ve yet to read a trade publication that succeeds by disagreeing with industry positions, and I still haven’t after today.

Unlike Todd, I am not paid one cent to write any of what appears here.  This site is entirely consumer-oriented and financed with no telecom industry involvement, no careers to make or break, and this fight is not about me.  I’m just a paying customer like most of our readers.

This site is about good players in the broadband industry who deserve to make good profits and enjoy success providing an important service to subscribers at a fair price, and about those bad players who increasingly seek to further monetize their broadband offerings by charging consumers more for the same service.  As one of the few telecom products nearly immune from the economic downturn, some providers are willing to leverage their barely-competitive marketplace position to cash in.

It’s about who has control over our broadband future – certain corporate entities and individuals who openly admit their desire to act as a controlling gatekeeper, or consumers who pay for the service.  It’s also about organizing consumers to push back when industry propaganda predominates in discussions about broadband issues, and we know where we can find plenty of that.  Finally it’s about evangelizing broadband, not in a religious sense, but promoting its availability even if it means finding alternatives to private providers who leave parts of urban and rural America unserved because it just doesn’t produce enough profit.

Let’s derail Todd’s latest choo-choo arguments.

“The idea of charging broadband customers based on what they use is still in play.” — That’s never been in play.  True consumption billing would mean consumers pay exactly for what they use.  If a consumer doesn’t turn on their computer that month, there would be no charge.  That’s not what is on offer.  Instead, providers want to overcharge consumers with speed -and- usage-based tiers that, in the case of Time Warner Cable, were priced enormously higher than current flat-rate plans.  Customers would be threatened with overlimit fees and penalties for exceeding a paltry tier proposed by the company last April.  The ‘Stop the Cap! guy’ didn’t generate thousands of calls and involvement by a congressman and United States senator writing blog entries.  Impacted consumers instinctively recognized a Money Party when they saw one, and drove the company back.  A certain someone at Multichannel News said Time Warner Cable was “taking one for the team.“  At least then you were open about whose side you were on.

“Verizon just wants to make more money by charging more for the same service. What an outrage! It’s not like the company spent billions and billions to build out their network and needs to recoup that investment.” — Recouping an investment is easily accomplished by providing customers with an attractive, competitively priced service that delivers better speed and more reliability than the competition.  Provide that in an era when fiber optic technology and bandwidth costs are declining, and not only does the phone company survive the coming copper-wire obsolescence, it also benefits from the positive press opinion leaders who clamor for your service will generate to attract even more business.  Stacey’s comments acknowledged the positive vibes consumers have towards Verizon’s fiber investment — positive vibes they are now willing to throw away.

Verizon FiOS already gets to recoup its investment from premium-priced speed tiers that are favored by those heavy broadband users.  Most will happily hand over the money and stay loyal, right up until you ask for too much.  Theoretically charging your best customers $140 a month for 50Mbps/20Mbps service and then limiting it to, say, 250GB of usage will be an example of asking for too much.  Verizon didn’t get into the fiber optics business believing their path to return on investment was through consumption billing for broadband.

“Today’s broadband networks — not even FiOS — are not constructed to deliver peak theoretical demand and adding more capacity to the home or farther upstream will require investment.” — Readers, today’s newest excuse for overcharging you for your broadband access is “peak theoretical demand.”  It used to be peer-to-peer, then online videos, and now this variation on the “exaflood” nonsense.  It sounds like Todd has been reading some vendor’s press release about network management.  Peak theoretical demand has never been the model by which residential broadband networks have been constructed.  The Bell System constructed a phone network that could withstand enormous call volumes during holidays or other occasional events.  Broadband networks were designed for “best effort” broadband.  If we’d been living under this the peak demand broadband model, cable modem service and middle mile DSL networks wouldn’t be constructed to force hundreds of households to share one fixed rate connection back to the provider.  It’s this design that causes those peak usage slowdowns on overloaded networks that work fine at other times.

No residential broadband provider is building or proposing constructing peak theoretical demand networks that are good enough to include a service and speed guarantee.  Instead, cable providers are moving to affordable DOCSIS 3 upgrades, which continue the “shared model” cable modems have always relied on, except the pipeline we all share can be exponentially larger and deliver faster speeds.  Will this model work for decades to come?  Perhaps not, but it’s generally the same principle Time Warner Cable is using to deliver HD channels quietly ‘on demand’ to video customers without completely upgrading their facilities.  You don’t hear them talk about consumption billing for viewing, yet similar network models are in place for both.

“Is it fairer to recover that necessary investment in additional capacity from the heaviest users, who are driving the most demand?” Apparently so, because providers already do that by charging premium pricing for faster service tiers attractive to the heaviest users.  But Todd, as usual, ignores the publicly-available financial reports which tell a very different tale – one where profits run in the billions of dollars for broadband service, where many providers Todd feels urgently need to upgrade their networks are, in reality, spending a lower percentage on their network infrastructure costs, all at the same time bandwidth costs are either dropping or fixed, making it largely irrelevant how much any particular user consumes. What matters is how much of a percentage of profits providers are willing to put back into their networks.

Do people like Todd really believe consumers aren’t capable of reading financial reports and watching executives speak with investors about the fact their networks are well-able to handle traffic growth (Glenn Britt, Time Warner Cable CEO), that consumption based billing represents potential increased revenue for companies that deny they even have a traffic management problem (Verizon), or that broadband is like a drug that company officials want to encourage consumers to keep using without unfriendly usage caps, limits, or consumption billing (Cablevision.)

“From 7 to 10 p.m., we’re all consumption kings,” Sandvine CEO David Caputo told Todd. “Bandwidth caps don’t do anything for you.” The implication of this finding is that “the Internet is really becoming like the electrical grid in the sense that it’s only peak that matters,” he added. — I would have been asking Todd to pick me up off the floor had Caputo said anything different.  His bread and butter, just like Todd’s, is based on pushing his business agenda.  Sandvine happens to be selling “network management” equipment that can throttle traffic, perhaps an endangered business should Net Neutrality become law in the United States.  His business depends on selling providers on the idea that sloppy usage caps don’t solve the problem — his equipment will.  Todd has no problem swallowing that argument because it helps him make his.  The rest of us who don’t work for a trade publication or a net throttler know otherwise.

What would actually be fair to consumers is to take some of those enormous profits and plow them back into the business to maintain, expand, and enhance services that deliver the gravy train of healthy revenue.  In fact, by providing even higher levels of service, they can rake in even larger profits.  You have to spend money to earn money, though.

Technology doesn’t sit still, which is why provider arguments about increased traffic leading to increased costs don’t quite ring true when financial reports to shareholders say exactly the opposite.  That’s because network engineers get access to new, faster, better networking technology, often at dramatically lower prices than what they paid for less-able technology just a few years earlier.  With new customers on the way, particularly for the cable industry picking up those dropping ADSL service from the phone company, there’s even more revenue to be had.

Or, do you think spreading the cost across all subscribers, thereby raising the flat-rate pricing for everyone, is the better option? Note that Comcast did this to an extent when it raised the monthly lease fee for cable modems by $2 (to $5), citing costs associated with its DOCSIS 3.0 buildout.

The industry already thinks so.  As we’ve documented, cable broadband providers like Time Warner Cable and Comcast (and Charter next year), are already raising prices across the board for broadband customers in many areas.  Does that mean the talk about Internet Overcharging schemes can be laid to rest?  Of course not.  They want their rate increases -and- consumption based billing for even fatter profits.

If, on the other hand, you want to pretend that all-you-can-eat plans are sustainable at today’s price tiers, you’d be kind of clueless.

Every ISP maintains an Acceptable Use Policy that provides appropriate sanctions for those users who are so far out of the consumption mainstream, they cannot even see the rest of us.  Slapping consumption based billing on consumers with steep overlimit fees and penalties punishes everyone, and the provider keeps the proceeds, and not necessarily for network upgrades.

If Todd believes consumers will sit still for profiteering by changing a model that has handsomely rewarded providers at today’s prices, with plenty of room to spare for appropriate upgrades, he’ll be the clueless one.  The cable industry’s ability to overreach never ceases to amaze me.  Every 15 years or so, legislative relief has to put them back in their place.  It’s what happens when just a handful of providers decide it is easier to hop on board the Internet Overcharging Express and cash those subscriber checks than actually engage in all-out competitive warfare with one another – keeping prices in check and onerous overcharges out of the picture.

Nobody needs to know my name to understand this.  But some of his provider friends already know the names of our readers, because PR disasters do not happen in a vacuum.  They are also acquainted with two other names: Rep. Eric Massa and Sen. Charles Schumer.  If they want to go hog wild with Internet Overcharging schemes, that list of names will get much, much longer.

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America's Broadband Emergency Plan Allows Up to Three Cat-Chasing-Laser-Pointer videos per day

The mainstream media loves a scare story.  Suggestions that a national H1N1 pandemic could bring the Internet as we know it to its knees is a surefire way to get plenty of attention.

The Chicago Tribune, among others, reports that a nationwide outbreak of virus forcing 40% of American workers to remain housebound could result in too many people sitting at home watching Hulu, bringing the entire Internet to a screeching halt.

The answer? Shut down video streaming sites and throttle users during national emergencies.

Of course, even more interesting is what never turns up in these kinds of stories — the news behind the sensationalist headlines.

The report on which this story is based comes courtesy of the General Accounting Office.  The GAO doesn’t simply issue reports willy-nilly.  A member or members of Congress specifically request the government office to research and report back on the issues that concern them.  In this instance, the report comes at the request of:

• Rep. Henry Waxman
• Rep. John D. Dingell
• Rep. Joe Barton
• Rep. Barney Frank
• Rep. Bennie G. Thompson
• Rep. Rick Boucher
• Rep. Cliff Stearns
• Rep. Edward J. Markey

The congressmen weren’t worrying exclusively about your broadband interests.  The GAO notes the study came from concern that such a pandemic could impact the financial services sector (the people that brought you the near-Depression of 2008-09).  The Wall Street crowd could be left without broadband while recovering from flu, and that simply wouldn’t do.

“Concerns exist that a more severe pandemic outbreak than 2009’s could cause large numbers of people staying home to increase their Internet use and overwhelm Internet providers’ network capacities. Such network congestion could prevent staff from broker-dealers and other securities market participants from teleworking during a pandemic. The Department of Homeland Security (DHS) is responsible for ensuring that critical telecommunications infrastructure is protected. GAO was asked to examine a pandemic’s impact on Internet congestion and what actions can be and are being taken to address it, the adequacy of securities market organizations’ pandemic plans, and the Securities and Exchange Commission’s (SEC) oversight of these efforts,” the report states.

Putting aside my personal desire that a little less broadband for deal-making, bailout-demanding “kings of the world” might not be a bad idea, the GAO’s report concludes what we already know — the business model of residential broadband is based on sharing connections and when too many people stay home and use them, it’s slow and doesn’t work well.

Providers do not build networks to handle 100 percent of the total traffic that could be generated because users are neither active on the network all at the same time, nor are they sending maximum traffic at all times. Instead, providers use statistical models based upon past users’ patterns and projected growth to estimate the likely peak load of traffic that could occur and then design and build networks based on the results of the statistical model to accommodate at least this level. According to one provider, this engineering method serves to optimize available capacity for all users. For example, under a cable architecture, 200 to 500 individual cable modems may be connected to a provider’s CMTS, depending on average usage in an area. Although each of these individual modems may be capable of receiving up to 7 or 8 megabits per second (Mbps) of incoming information, the CMTS can transmit a maximum of only about 38 Mbps. Providers’ staff told us that building the residential parts of networks to be capable of handling 100 percent of the traffic that all users could potentially generate would be prohibitively expensive.

In other words, guess your customer demand correctly and 200-500 homes can all share one 38Mbps connection.  Guess incorrectly, or put off expanding that network to meet the anticipated demands because your company wants to collect “cost savings” from reduced investment, and everyone’s connection slows down, especially at peak times.

One way to dramatically boost capacity for cable operators is to bond multiple channels of broadband service together, using the latest DOCSIS 3 standard.  It provides cable operators with increased flexibility to meet growing demands on their network without spending top dollar on wholesale infrastructure upgrades.  Many operators are already reaping the rewards this upgrade provides, by charging customers higher prices for higher speed service.  But it also makes network management easier without inconveniencing existing customers with slowdowns during peak usage.

The GAO didn’t need 77 pages to produce a report that concludes broadband usage skyrockets when people are at home.  Just watching holiday shopping traffic online spike during deal days like “Cyber Monday,” after Thanksgiving would illustrate that.  Should 40 percent of Americans stay home from work, instead of browsing the Internet from their work machines, they’ll be doing it from home.  That moves the bottleneck from commercial broadband accounts to residential broadband networks.

The GAO says such congestion could create all sorts of problems for the financial services sector, slowing down their broadband access.

Providers’ options for addressing expected pandemic-related Internet congestion include providing extra capacity, using network management controls, installing direct lines to organizations, temporarily reducing the maximum transmission rate, and shutting down some Internet sites. Each of these methods is limited either by technical difficulties or questions of authority. In the normal course of business, providers attempt to address congestion in particular neighborhoods by building out additional infrastructure—for example, by adding new or expanding lines and cables. Internet provider staff told us that providers determine how much to invest in expanding network infrastructure based on business expectations. If they determine that a demand for increased capacity exists that can profitably be met, they may choose to invest to increase network capacity in large increments using a variety of methods such as replacing old equipment and increasing the number of devices serving particular neighborhoods. Providers will not attempt to increase network capacity to meet the increased demand resulting from a pandemic, as no one knows when a pandemic outbreak is likely to occur or which neighborhoods would experience congestion. Staff at Internet providers whom we interviewed said they monitor capacity usage constantly and try to run their networks between 40 and 80 percent capacity at peak hours. They added that in the normal course of business, their companies begin the process to expand capacity when a certain utilization threshold is reached, generally 70 to 80 percent of full capacity over a sustained period of time at peak hours.

However, during a pandemic, providers are not likely to be able to address congestion by physically expanding capacity in residential neighborhoods for several reasons. First, building out infrastructure can be very costly and takes time to complete. For example, one provider we spoke with said that it had spent billions of dollars building out infrastructure across the nation over time, and adding capacity to large areas quickly is likely not possible. Second, another provider told us that increasing network capacity requires the physical presence of technicians and advance planning, including preordering the necessary equipment from suppliers or manufacturers. The process can take anywhere from 6 to 8 weeks from the time the order is placed to actual installation. According to this provider, a major constraint to increasing capacity is the number of technicians the firm has available to install the equipment. In addition to the cost and time associated with expanding capacity, during a pandemic outbreak providers may also experience high absenteeism due to staff illnesses, and thus might not have enough staff to upgrade network capacities. Providers said they would, out of necessity, refrain from provisioning new residential services if their staff were reduced significantly during a pandemic. Instead, they would focus on ensuring services for the federal government priority communication programs and performing network management techniques to re-route traffic around congested areas in regional networks or the national backbone. However, these activities would likely not relieve congestion in the residential Internet access networks.

It’s clear some broadband providers are not willing to change their business models to redefine congestion from measurements taken during peak usage when speeds slow, to those that anticipate and tolerate traffic spikes.  That means making due with what broadband providers are delivering today and developing technical and legal means to ration, traffic shape, or simply cut access to high bandwidth traffic during ‘appropriate emergencies.’  Right on cue, the high bandwidth barrage of self-serving provider talking points are on display in the report:

Providers identified one technically feasible alternative that has the potential to reduce Internet congestion during a pandemic, but raised concerns that it could violate customer service agreements and thus would require a directive from the government to implement. Although providers cannot identify users at the computer level to manage traffic from that point, two providers stated that if the residential Internet access network in a particular neighborhood was experiencing congestion, a provider could attempt to reduce congestion by reducing the amount of traffic that each user could send to and receive from his or her network. Such a reduction would require adjusting the configuration file within each customer’s modem to temporarily reduce the maximum transmission speed that that modem was capable of performing—for example, by reducing its incoming capability from 7 Mbps to 1 Mbps. However, according to providers we spoke with, such reductions could violate the agreed-upon levels of services for which customers have paid. Therefore, under current agreements, two providers indicated they would need a directive from the government to take such actions.

Shutting down specific Internet sites would also reduce congestion, although many we spoke with expressed concerns about the feasibility of such an approach. Overall Internet congestion could be reduced if Web sites that accounted for significant amounts of traffic—such as those with video streaming—were shut down during a pandemic. According to one recently issued study, the number of adults who watch videos on video-sharing sites has nearly doubled since 2006, far outpacing the growth of many other Internet activities. However, most providers’ staff told us that blocking users from accessing such sites, while technically possible, would be very difficult and, in their view, would not address the congestion problem and would require a directive from the government.

Enjoy up to one Hogan's Heroes episode per day during the H1N1 flu pandemic

You have to love some of the players in the broadband industry who trot out their most-favored “network management” talking points to handle a national emergency.  It’s interesting to note providers told the GAO they were concerned with violating customer agreements regarding speed guarantees, when most providers never guarantee residential service speeds.  Their first solution is the Net Neutrality-busting traffic throttle, to slow everyone down to ration the “good enough for you” network in your neighborhood.  Shutting down too-popular, high bandwidth websites like Hulu (no worries – you can watch your favorite shows on our cable TV package) is apparently someone’s good idea, but considering providers admit it wouldn’t actually solve the congestion problem, one’s imagination can ponder what other problems such a shutdown might solve.

One provider indicated that such blocking would be difficult because determining which sites should be blocked would be a very subjective process. Additionally, this provider noted that technologically savvy site operators could change their Internet protocol addresses, allowing users to access the site regardless. Another provider told us that some of these large bandwidth sites stream critical news information. Furthermore, some state, local, and federal government offices and agencies, including DHS, currently use or have plans to increase their use of social media Web sites and to use video streaming as a means to communicate with the public. Shutting down such sites without affecting pertinent information would be a challenge for providers and could create more Internet congestion as users would repeatedly try to access these sites. According to one provider, two added complications are the potential liability resulting from lawsuits filed by businesses that lose revenue when their sites are shutdown or restricted and potential claims of anticompetitive practices, denial of free speech, or both. Some providers said that the operators of specific Internet sites could shut down their respective sites with less disruption and more effectively than Internet providers, and suggested that a better course of action would be for the government to work directly with the site operators.

A very subjective process indeed, but one many providers have sought to keep within their “network management” control as they battle Net Neutrality.  One would think “potential claims of anti-competitive practices” would represent an understatement, particularly if cable industry-operated TV Everywhere theoretically kept right on running even while Hulu could not.  As long time net users already know, outright censorship or content blockades almost always meet resistance from enterprising net users who make it their personal mission to get around such limits.

Expanding broadband networks to provide a better safety cushion during periods of peak usage is looking better and better.

Providers could help reduce the potential for a pandemic to cause Internet congestion by ongoing expansions of their networks’ capacities. Some providers are upgrading their networks by moving to higher capacity modems or fiber-to-the-home systems. For example, some cable providers are introducing a network specification that will increase the download capacity of residential networks from the 38 Mbps to about 152 to 155 Mbps. In addition to cable network upgrades, at least one telecommunications provider is offering fiber-to-the home, which is a broadband service operating over a fiber-optic communications network. Specifically, fiber-to-the-home Internet service is designed to provide Internet access with connection speeds ranging from 10 Mbps to 50 Mbps.

Hello.

Sounds like a plan to me, and not just for the benefit of the Wall Street crowd sick at home with the flu.  Such network upgrades can be economical and profitable when leveraged to upsell the broadband enthusiast to higher speed service tiers.  During periods of peak usage, such networks will withstand considerably more demand and provide a better answer to that nagging congestion problem.

The alternative is Comcast or Time Warner Cable, in association with the Department of Homeland Security, having to appear on Wolf Blitzer’s Situation Room telling Americans they have a broadband rationing plan that will give you six options of usage per day.  Choose any one:

• Up to three videos of cats chasing laser pointers on YouTube
• One episode of Hogan’s Heroes
• Up to six videos of your friends playing Guitar Hero on Dailymotion
• Unlimited access to Drugstore.com to browse remedies
• Five MySpace videos of your favorite bands
• Up to 500 “tweets” boring your followers with every possible detail of your stuck-at-home-sick routine

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Phillip Dampier

The Wall Street Journal today published an article reviewing the landscape of flat rate broadband service and how some Internet providers want to change it.

The article quotes me on the issue of Internet Overcharging becoming a political football in the Net Neutrality debate.

“This could come down to carriers saying, ‘If you don’t allow us to manage our networks the way we see fit, then we will just have to cap everything,’ ” says Phillip Dampier, a consumer advocate focusing on technology issues in Rochester, N.Y. “They’ll make it an either/or thing: give them more control over their network or expect metered broadband.”

Mr. Dampier was among those who forced Time Warner Cable to shelve a metered Internet pilot program in several cities last year. The company, which had argued the plan would be a fairer way to charge for access, acknowledged it was a “debacle.” It won’t say if it plans to revive the trials.

Unfortunately, the article never bothers to mention Stop the Cap!, the website dedicated to fighting these overcharging schemes.

AT&T weighs in on their experiment to overcharge consumers in Beaumont, Texas and Reno, Nevada, and analysts think Net Neutrality arguments may give providers an excuse to expand those experiments, launch price increases and blame it on Net Neutrality policies:

“Some type of usage-based model, for those customers who have abnormally high usage patterns, seems inevitable,” an AT&T spokesman says. AT&T declined to provide more details on its trials.

“Unquestionably, the carriers erred in their initial selling of broadband with a flat rate,” says Elroy Jopling, research director of Gartner Inc. “They assumed no one would use it as much as they do now, but then along came high-definition movies. They’re now trying to get around that mistake.”

Network neutrality deals primarily with ensuring that Internet providers don’t favor any online traffic over any other. Still, Mr. Jopling and other analysts argue, the net neutrality debate might provide the carriers with an opening to argue for changing that pricing.

“With network neutrality enforced, the only other option for carriers is to charge by the byte or to raise the flat-rate pricing,” says Johna Till Johnson, president of Nemertes Research. “Right now they’re just deciding which one to do. Just be prepared to pay more.”

It's "Rep. Eric Massa," Not 'Joe Messa'

The article has several flaws.

• It mis-identifies Rep. Eric Massa (D-New York) as “Rep. Joe Messa.”  Rep. Massa introduced legislation to ban Internet Overcharging when companies cannot produce actual evidence to justify it, particularly in the limited competitive marketplace for broadband in the United States.
• The article fails to mention the usage limits proposed by smaller broadband providers, including Frontier’s infamous 5GB usage definition in their Acceptable Use Policy.  This is a very important fact to consider when the article quotes Professor Andrew Odlyzko, an independent authority on broadband usage, as stating the average broadband consumer uses triple that amount (15 gigabytes per month).
• The quotation about the number of e-mails or web page views available under plan allowances that routinely appear in such articles ignores the increasing use of higher bandwidth applications like online video.  Telling a consumer they can send 75 million e-mails is irrelevant information because no consumer would ever need to worry about usage limits if they only used their account for web page browsing and e-mail usage.  They very much do have to be concerned if they use their service to watch online video from Hulu or Netflix, or use one of the online backup services.
• The article makes no mention of publicly available financial reports from broadband providers like Time Warner Cable that prove that at the same time their profits on broadband service are increasing, the company’s costs to provide the service continue to decline, along with the dollar amounts they spend to maintain and expand that network to meet demand.  Providing readers with insight into the true financial picture of a broadband provider, instead of simply quoting the public relations line of the day would seem particularly appropriate for The Wall Street Journal.
• The article doesn’t make mention that the same providers arguing increased Internet traffic is creating a problem for them are also working to launch an online video distribution platform that will rival Hulu in size and scope.  TV Everywhere will consume an enormous amount of the broadband network they claim can’t handle today’s traffic without Internet Overcharging schemes being thrown on customers.  Of course, such usage limits are very convenient for companies like Comcast, Time Warner Cable and AT&T, which are now in the business of selling pay television programming to consumers.  Should a consumer choose to watch all of their television online instead of paying for a cable package, a usage allowance will help put a stop to that very quickly, as will planned restrictions that only provide online video to “authenticated” existing pay television subscribers.

One thing remains certain – providers are still itching to overcharge you for your broadband service.  Consumers and the public interest groups that want to represent them must stand unified in opposition to Internet Overcharging schemes and for Net Neutrality protection, and never accept sacrificing one for the other.

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An avalanche of iPhones is to blame for AT&T's wireless problems, according to a Slate columnist

Telecommunications companies love people like Farhad Manjoo.  He’s a technology columnist for Slate, and he’s concerned with the congestion on AT&T’s wireless network caused by Apple iPhone owners using their phones ‘too much and ruining AT&T’s service for everyone else.’  Manjoo has a solution — do away with AT&T’s flat data pricing for the iPhone and implement a $10 price increase for any customer exceeding 400 megabytes of usage per month. For those using less than 400 megabytes, he advocates for a “pay for what you use” billing model.  Will AT&T adopt true consumption billing, a usage cap, or just another $10 price increase?  History suggests the latter two are most likely.

Stop the Cap! reader Mary drew our attention to Manjoo’s piece, which predictably has been carried through the streets by cheering astroturf websites connected with the telecommunications industry who just love the prospect of consumers paying more money.  They’ve called the organizations that work to fight against such unfair Internet Overcharging schemes “neo-Marxist,” ignoring the fact the overwhelming majority of consumers oppose metered broadband service and still don’t know the words to ‘The Internationale.’

Manjoo’s description of the problem itself has problems.

His argument is based on the premise that the Apple iPhone is virtually a menace on AT&T’s network.  He blames the phone for AT&T customers having trouble getting their calls through or for slow speeds on AT&T’s data network.

Every iPhone/AT&T customer must deal with the consequences of a slowed-down wireless network. Not every customer, though, is equally responsible for the slowdown. At the moment, AT&T charges $30 a month for unlimited mobile Internet access on the iPhone. That means a customer who uses 1 MB a month pays the same amount as someone who uses 1,000 MB. I’ve got a better plan—one that superusers won’t like but that will result in better service, and perhaps lower bills, for iPhone owners: AT&T should kill the all-you-can-eat model and start charging people for how much bandwidth they use.

How would my plan work? I propose charging $10 a month for each 100 MB you upload or download on your phone, with a maximum of $40 per month. In other words, people who use 400 MB or more per month will pay $40 for their plan, or $10 more than they pay now. Everybody else will pay their current rate—or less, as little as $10 a month. To summarize: If you don’t use your iPhone very much, your current monthly rates will go down; if you use it a lot, your rates will increase. (Of course, only your usage of AT&T’s cellular network would count toward your plan; what you do on Wi-Fi wouldn’t matter.)

First, and perhaps most importantly, AT&T not only voluntarily, but enthusiastically sought an exclusive arrangement with Apple to sell the iPhone.  For the majority of Americans, using an iPhone means using AT&T as their wireless carrier.  If AT&T cannot handle the customer demand (and the enormous revenue it earns from them), perhaps it’s time to end the exclusivity arrangement and spread the iPhone experience to other wireless networks in the United States.  I have not seen any wireless provider fearing the day the iPhone will be available for them to sell to customers.  Indeed, the only fear comes from AT&T pondering what happens when their exclusivity deal ends.

Second, problems with voice calling and dropped calls go well beyond iPhone owners ‘using too much data.’  It’s caused by less robust coverage and insufficient capacity at cell tower sites.  AT&T added millions of new customers from iPhone sales, but didn’t expand their network at the required pace to serve those new customers.  A number of consumers complaining about AT&T service not only mention dropped calls, but also inadequate coverage and ‘fewer bars in more places.’  That has nothing to do with iPhone users.  Congestion can cause slow speeds on data networks, but poor reception can create the same problems.

Third, the salvation of data network congestion is not overcharging consumers for service plans.  The answer comes from investing some of the $1,000+ AT&T earns annually from the average iPhone customer back into their network.  To be sure, wireless networks will have more complicated capacity issues than wired networks do, but higher pricing models for wireless service already take this into account.

Business Week covered AT&T’s upgrade complications in an article on August 23rd:

Many of AT&T’s 60,000 cell towers need to be upgraded. That could cost billions of dollars, and AT&T has kept a lid on capital spending during the recession—though it has made spending shifts to accommodate skyrocketing iPhone traffic. Even if the funds were available now, the process could take years due to the hassle and time needed to win approval to erect new towers and to dig the ditches that hold fiber-optic lines capable of delivering data. And time is ticking. All carriers are moving to a much faster network standard called LTE that will begin being deployed in 2011. Once that transition has occurred, the telecom giant will be on a more level playing field.

And there are limits to how fast AT&T can move. While it may take only a few weeks to deploy new-fangled wireless gear in a city’s cell towers, techies could spend months tilting antennas at the proper angle to make sure every square foot is covered.

Karl Bode at Broadband Reports also points out a good deal of the iPhone’s data traffic never touches AT&T’s wireless network and he debunked a piece in The Wall Street Journal that proposed some of the same kinds of pricing and policy changes Manjoo suggests:

iPhone users are using Wi-Fi 42% of the time and the $30 price point is already a $10 bump from the first generation iPhone. The Journal also ignores the absolutely staggering profits from SMS/MMS, and the fact that AT&T posted a net income of $3.1 billion for just the first three months of the year. That’s even after the network upgrades the Journal just got done telling us make unlimited data untenable.

Sanford Bernstein’s Craig Moffett has been making the rounds lately complaining that a wireless apocalypse is afoot, telling any journalist who’ll listen that the wireless market is “collapsing” and/or “grinding to a halt.” Why? Because as new subscriber growth slows and the market saturates, incredible profits for carriers like AT&T and Verizon Wireless may soon be downgraded to only somewhat incredible. Carriers may soon have to start competing more heavily on pricing, driving stock prices down. That’s great for you, but crappy for Moffett’s clients.

You’ll note that neither the Journal nor Moffett provide a new business model to replace the $30 unlimited plan, but the intentions are pretty clear if you’ve been playing along at home. As on the terrestrial broadband front, investors see pure per-byte billing as the solution to all of their future problems, as it lets carriers charge more money for the same or less product (ask Time Warner Cable). Of course as with Mr. Moffett’s opinions on network upgrades, what’s best for Mr. Moffett quite often isn’t what’s best for consumers.

If AT&T doesn’t have the financial capacity or willingness to appropriately grow their network, inevitably customers will take their wireless business elsewhere, and perhaps Apple will see the wisdom of not giving the company exclusivity rights any longer.

Manjoo’s proposals (except the $10 rate increase, which they’ll love) would almost certainly never make it beyond the discussion stage.  A pricing model that automatically places consumers using little data into a less expensive price tier, or relies on a true consumption “pay for exactly what you use” pricing model would cannibalize AT&T’s revenue.  Past Internet Overcharging pricing has never been about saving customers money — they just charge more to designated “heavy users” for the exact same level of service.  Need more money?  Redefine what constitutes a “heavy user” or just wait a year when today’s data piggies are tomorrow’s average users.  Now they can all pay more.

The average iPhone user already pays a premium for their AT&T iPhone experience — an average $90 a month for a combined mandatory voice and data plan — costs higher than those paid by other AT&T customers.  AT&T accounted for the anticipated data usage of the iPhone in setting the pricing for monthly service.

The biggest data consumers aren’t smartphone or iPhone users. That designation belongs to laptop or netbook owners using wireless mobile networks for connectivity.  Those plans universally are usage capped at 5 gigabytes per month, far higher than the 400 megabyte cap Manjoo proposes.  If AT&T felt individual iPhone customers were the real issue, they would have already usage capped the iPhone data plan.  Instead, they just increased the price, ostensibly to invest the difference in expanding their network.

Perhaps at twice the price, everything would be nice.

Manjoo admits AT&T does not release exact usage numbers, but it’s obvious a phone equipped to run any number of add-on applications that the iPhone can will use more data than a cumbersome phone forcing customers to browse using a number keypad.  That in and of itself does not mean iPhone users are “data hogs.”  In reality, 400 megabytes of usage a month on a network also handling wireless broadband customers with a 5 gigabyte cap is a pittance.  That’s 10 times less than a customer can use on an AT&T wireless broadband-equipped netbook, and still be under their monthly allowance.

Here’s a better idea: end the monopoly AT&T has on the iPhone in the United States. That would immediately do a lot more for AT&T customers, as the so-called “data hogs” that hate AT&T flee off their network.

Manjoo’s alternatives are a “pay $10 more” solution that won’t save consumers money and “pay exactly for what you use” plan that AT&T will never accept.

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Another day, another angle on Internet Overcharging, this time from the team of Dr. Kevin A. Hassett & Dr. Robert J. Shapiro.  These two economists at the Georgetown Center for Business and Public Policy have produced a very narrow report that takes a new angle on why Internet Overcharging schemes like consumption billing represent the answer to universal broadband adoption.  The study claims that the era of the “exaflood” is nearing, and private broadband providers are being called on to spend $100-300 billion dollars to meet the needs of the top 20% of “high bandwidth users” using most of the bandwidth.

The report asks, should the costs be divided equally between every customer, which they posit will increase broadband pricing across the board, or should 80% of those costs be paid by the 20% they claim consumes the most?  Their fingers are pressed firmly on the side of the scale marked “heavy users pay more,” theorizing that alone will increase broadband adoption.

What makes Towards Universal Broadband: Flexible Broadband Pricing and the Digital Divide different from the usual refrain that consumption billing is the “fairest way” to price broadband service is the presumed added benefit that such pricing will benefit rural communities, minorities and the poor.  Namely, that unless we move to such a system, rural consumers and low-income Americans will never purchase broadband service because of price sensitivity.  Increase pricing for everyone, they suggest, and the United States will not achieve the president’s ambition for universal broadband adoption.

The report is an industry dream come true.  Expect the usual suspects to wave it around in the air as “proof” of the need to overcharge you for broadband.

But before the Money Party gets started, let’s critically evaluate whether this report represents the solution we’ve been waiting for, or a nice excuse to simply increase prices and promise upgrades later.

It quickly becomes obvious the report is myopic from start to finish, presuming facts not in evidence, or that come from self-interested parties, and relies only on a single solution — price increases.  The only debate is over which customers pay more: all of them or just the “heavy users.”

Smart readers already know in the end, everyone pays more no matter what.

And Now the Rest of the Story

Of course, the differing rates of broadband adoption across racial, geographic and income classes are strongly interrelated. A large portion of the disparity in uptake rates by race and geography, for example, are driven by differences in household income. Studies have indicated that uptake rates also are strongly correlated with education and the need for high speed Internet in the workplace.

Our difficult economic times have reversed these trends over the past two years, and the broadband access gap between African‐Americans and white Americans widened in both 2008 and 2009. Broadband adoption among African‐Americans rose only slightly in 2008 and 2009 following several years of much more substantial increases. Meanwhile, broadband adoption by white households continued to rise steadily. As a result, the broadband‐access gap between the races was wider in 2009 than it had been in 2005. A significant rural‐urban gap in broadband uptake rates also has persisted, as rural Americans increased their broadband access at about the same pace as those who live in cities and suburbs.

Respondents to the Pew survey report that their average bills for broadband service fell from $39 to $34.50 between 2004 and 2008. Interestingly, adoption continued to rise in 2009 despite a jump in prices back to the 2004 level. To some extent, the 2009 price levels may reflect the willingness of a growing number of Americans to pay more for premium services that provide even higher speeds. The average monthly cost of basic service stood at $37.10 in 2009, while premium subscribers paid an average of $44.60, according to the Pew Survey. Additionally, economic studies have concluded that households that have adopted broadband Internet are far less price sensitive or “price elastic” than prospective adopters.

These findings are supported by recent experience, which suggests that adoption would have been even higher in 2009 if the price increases had not occurred. Pew reports, for example, that almost one in ten Americans either cancelled or cut back Internet service for financial reasons between April 2008 and April 2009. These cutbacks were greatest at the bottom of the income scale, with 17 percent of households earning $20,000 or less reporting that they reduced or gave up service during 2008.

Most of the Pew data in this section is verifiable, but really only tells a small part of a much greater story.  The broadband adoption rate continues to grow, but users are price sensitive, especially as  income levels decline.  It’s common sense to assume that the higher a cost for a product or service, the lower the adoption rate among income challenged consumers.  Of course, at no point do the authors ever contemplate broadband provider complicity in the current pricing structure for broadband.  They merely accept the status quo duopoly that most consumers face in broadband pricing, which is now on the increase as providers face revenue challenges in the video and telephone marketplace.  The racial component of their argument is hardly explored, so we have no idea whether it is an issue of income, household location, social factors, or some other hurdle we don’t know about.

Also totally unexplored is the question of broadband availability in rural communities.  In those areas, broadband adoption starts with having a service to adopt in the first place, followed by the value of a service at the slow speeds for high prices typically on offer.

My biggest criticism of this report is its tunnel-vision-like approach to defining the problem and crafting a single solution for it.  The report hints at something very pertinent to this debate, but then completely ignores it going forward.

“To some extent, the 2009 price levels may reflect the willingness of a growing number of Americans to pay more for premium services that provide even higher speeds.”

One might think a report based on how to obtain the revenue necessary to build broadband networks of the future might want to explore the potential revenue earned from premium services delivering higher speeds, particularly considering those enhanced services are often adopted by those that use their connections to a much greater degree than average consumers.  Indeed, since the report will later suggest that 20% of the customers who consume the most data should pay 80% of the costs for upgrades, it’s more important than ever to consider whether these customers already present a financial solution to their self-described dilemma.  Would higher usage consumers gratefully accept higher pricing for faster tiers of service?  Would speed-based tiering represent a better, more positive solution for consumers and the industry in lieu of consumption based pricing for every broadband consumer.  The authors don’t bother to find out.

The report also seems to downplay the fact that 100% of consumers may never want broadband service in their home, and that doesn’t necessarily represent a problem.  Customers that have it, the report notes, are more committed to keeping it than those who don’t have it are about getting it in the first place.  I’m not certain that actually represents a problem, particularly if it means pickpocketing loyal customers in an effort to capture potential new customers that simply don’t want the service at any price.

Hassett and Shapiro are either unaware, or ignore, the fact many providers already heavily market to non-broadband customers, offering promotional pricing and discounts, as well as “economy” tiers providing cheaper, albeit slower, broadband service.  These economy tiers are still significantly faster than dial-up, and provide enough of an enhanced online experience to bring budget-minded consumers on board, if only to discard their current dial-up service provider.

Customers who spend significant amounts of time online already demonstrate their loyalty to the product — it’s one of the few success stories in the current economy for cable and telephone companies who are seeing slowed growth or declines from their other product lines.

To Capture New Customers, You Should Be Able to Experiment on Your Loyal Customers

As policymakers consider the future of broadband policy, they must try to determine whether the historic pattern of technology diffusion will replicate itself with broadband or whether the re‐widening of the Internet access gap is a harbinger of new challenges.  Specifically, they must ask themselves what would happen to adoption trends if Internet service providers change their consumer pricing models to accommodate additional costs arising from expanded demand for bandwidth. This paper is intended to provide insights into those questions by examining the impact of various pricing approaches and pricing allocations among consumers.

Policymakers might also want to consider whether the current model for providing broadband, which is a monopoly or duopoly for most consumers, is the best thing for this country.  They might also want to take a look outside of their theory bubbles and review what happened in Canada where their experiment came to life.  Not only did pricing changes anger existing customers, it ultimately provided little, if any savings for consumers.  Indeed, when the usage caps arrived and consumption billing arrived, so did price increases and speed throttles.  Policymakers need not dwell too much on their theories and numbers provided by this report, when a quick trip to Toronto or Montreal can provide real world evidence that these schemes don’t provide real savings to consumers, just higher pricing and more restrictive service, and a continued decline in Canada’s broadband rankings.

None of this is explored in this report, of course.

When Self-Interested Parties & Astroturfers Provide the Facts & Figures…

An inescapable and critical flaw in this report is the repeated reliance on data from known astroturfers, funded by the broadband industry to represent their interests, along with self-interested parties like equipment manufacturers whose sales will, in part, depend on making a case for a need to buy their “solutions” to the “problems” they define.  At no time do the authors ever consider whether the data they are relying on is credible, much less provide readers with some disclaimers about source self-interest.

Cisco Systems, for example, has forecast that Internet traffic will quintuple from 2008 to 2013, driven largely by video and what it calls “visual networking.”

Cisco is well known for their reports predicting connectivity calamity… unless you manage it by purchasing Cisco products, of course.  This report cites Hyperconnectivity and the Approaching Zettabyte Era, something we criticized back in June for not exactly being an independent, dispassionate piece.

In one, widely‐cited report, EDUCAUSE, a higher‐education technology group estimated that providing “big‐broadband” to every home and business, with sufficient bandwidth to meet demand, would cost an additional $100 billion over the next three to five years and even larger investments in capacity going forward.

Apparently the authors stopped reading EDUCAUSE’s report after capturing the dollar data they cited, because unlike Hassett and Shapiro’s very narrow focus on justifying broadband pricing ripoffs, EDUCAUSE’s A Blueprint for Big Broadband, by John Windhausen Jr., calls out the failures prevalent among broadband providers in the United States.  Windhausen suggests consumption billing trials are a symptom of a broadband provider not making appropriate investments in their network, instead relying on temporary fixes like usage caps to try and reduce demand on their broadband platforms.  He specifically mentioned Time Warner Cable’s experiment in April as an example.

Windhausen advocates for a range of solutions to the capacity crunch that don’t involve ripping off consumers by charging them ever-increasing prices for service, or consumption billing.

Solutions do include:

• Leadership, Vision, and Goals – America should lead the world in broadband speed and availability, with 100Mbps being the target by 2012.
• Organization – Establish a Broadband Council that includes consumers (remember us?), business leaders, and public officials to implement and oversee broadband policy.
• Tax Incentives – Reward the private sector for taking risks on the most advanced technological solutions (fiber in particular) to overcome Wall Street resistance.
• A New Universal Broadband Fund – Direct subsidies to rural and other difficult markets to ensure broadband equality.
• Openness – Net Neutrality protections enforced by law.
• State and Municipal Broadband and Rights-of-Way – An end to industry-driven legal prohibitions on state/municipal broadband service.
• Consumer Education – Efforts to educate consumers about the benefits and managing risks from the online world.
• Broadband Technology Research – America should be a leader in discovering and managing new breakthrough’s in broadband technology.

Or just impose consumption billing on consumers, as Dr. Kevin A. Hassett & Dr. Robert J. Shapiro advocate, and providers will magically lower prices for consumers and create and build the next generation of broadband networks with the money they earn.

Hassett and Shapiro need to get out more and review the documentation assembled over the course of two weeks in April when Time Warner Cable attempted their experiment, because those promised network upgrades, assuming consumers accepted the consumption billing proposal (and they in loud and large numbers did not), turned out to come without any firm dates, and just weeks later were dismissed by the CEO as unnecessary in the short term, because Time Warner Cable has plenty of capacity on their existing network.

It’s hard to sell an “exaflood” when the broadband provider’s CEO denies there is one at hand.

But Hassett and Shapiro still try:

Another estimate cited by David McClure, the head of the U.S. Internet Industry Association, and John Ernhardt, Senior Manager of Policy Communications for Cisco Systems, projects that the long‐term investments required to keep up with fast‐rising bandwidth demand could cost an additional $300 billion over 20 years. (David McClure, “The Exabyte Internet,” U.S. Internet Industry Association, 1 May 2007)

Teletruth, a watchdog site, identified USIIA as one of several groups that TeleTruth called out for its association with an industry public relations/public policy agenda:

U.S. Internet Industry Association

• “The U.S. Internet Industry Association (USIIA), a 13-year-old trade association that represents “companies engaged in Internet commerce, content and connectivity.” Verizon is the biggest name represented on its board of directors.”
• http://netcompetition.org/index.php/go/in-the-news-more/report_net_neutrality_could_kill_e_health_plans/
• David P. McClure, President and CEO, U.S. Internet Industry Association, is also an author of the NMRC Muni Wifi report.
• USIIA has been a client of Issue Dynamics.

The USIIA has been pushing the theory of the “exaflood” that remains highly dubious in the eyes of independent researchers who also study broadband traffic.  Hassett and Shapiro accept it on face value.

Heavy Users Are Already Hooked & Won’t Mind Paying More Anyway

Absent another source of revenue, such as a system that assesses fees on content providers or high bandwidth users, the costs of these additional investments will generate broad price increases substantially larger than those experienced during the expansion of dialup Internet access.

Heavy bandwidth users are assumed to be relatively price insensitive, so their broadband subscription rates remain unaffected by price increases. We do not have adequate data to assess this assumption, but it is reasonable given the likelihood that habit formation would drive consumers to continue the practices that have driven their high bandwidth usage to date. To the extent that high bandwidth users are more sensitive to higher prices than we have assumed, companies would have to choose between spreading the cost to lower bandwidth users, and increasing prices more for high bandwidth users.

We’re clearly well into the realm of “assuming facts not in evidence” with the authors’ assumptions on the price sensitivity of customers: heavy, medium, or light.  When Time Warner Cable attempted their experiment, there was considerable outrage at the premise of consumption billing, because consumers don’t want this pricing, regardless of their usage.

The authors’ arrogant presumption that once consumers are hooked on the service, they’ll continue to pay more (much more under the ’20% of users pay for 80% of the $100-300 billion dollar upgrades’ formula) comes with no evidence of any kind.  In fact, all of the evidence is that consumers will become upset and raise hell with the providers that try it.

Assessing fees on content providers was an industry favorite just a few years ago, and it’s interesting to find this “solution” brought up yet again.  It was an astroturfer favorite, and was one of the major points of contention over the Net Neutrality debate, now firing up once again.  The industry wants to Re-Educate consumers about consumption billing and is now faced with re-fighting the Net Neutrality debate and this nice report, from the industry’s perspective, appears right on cue.

How About Asking the Industry to Take Some of their Profits and Invest in Their Own Networks

Totally absent from this report is even a cursory review of the current profits earned by broadband providers using the existing flat rate pricing formula.  They are well into the billions. Today, despite those profits and the scary “exaflood” rhetoric,  many have reduced the amount of money they spend on their broadband networks for needed upgrades.  Instead, it appears some of that money is being funneled into public policy lobbying efforts to get consumers to accept much higher pricing for broadband under the guise of “fairness.”

Nowhere are the authors willing to explore industry investment in their networks, much less the implications of a national broadband policy that will play a part in constructing, overseeing, and operating a national broadband platform in the interests of citizens, not simply shareholders.

An obvious path to bigger profits for providers already exists, and consumers enthusiastically support it as being an even fairer solution — charging a premium for higher speed tiers of broadband service.  No light user is going to commit to spending $60+ dollars a month on a premium speed package, but many of the larger consumers of broadband data will do so, happily.  Those investments can easily pave the way for DOCSIS 3 deployments which benefit every customer on a cable network, from light users not subjected to neighborhood congestion, to average users that can quickly access the content they want, to heavy users that will enjoy the faster online experience they have clamored for, and demonstrate a willingness to pay to achieve.

That’s a broadband success story everyone can agree on.

Unfortunately, it’s also the one that requires providers spend some of those big profits to construct the networks capable of providing premium speed tiers.  For them, the path of least resistance is to stall upgrades as long as possible by slapping consumption billing and usage caps on consumers to get them to reduce their usage, even as their own broadband bandwidth costs continue to decline.

Why We Don’t Pick Up What They Are Putting Down

Consumers’ real world experiences mean a lot more than statistical theories (especially when some of those statistics are fed by the self-interested broadband industry).  They know cable bills never decrease, only increase, unless you drop services.  They know many phone companies aren’t willing to invest in fiber optics to the home and settle for ordinary DSL or hybrid fiber-copper systems that don’t deliver much real “savings” in the end.  The authors assume that consumers and policymakers will accept the premise that if you allow them to overcharge a portion of broadband customers, it will miraculously create benevolent pricing for income challenged consumers who will finally adopt broadband because of the public-service-like generosity of the broadband industry to give them a much reduced price.

That’s one theory the authors cannot prove, and don’t even try.

In Canada, the authors’ findings have already been tested, and it was bad news for consumers right down the line.  First price increases, then usage caps, then speed throttles, then even more price increases.  Even the highest speed premium tiers carry relatively paltry usage caps, diminishing their potential value to Canadian consumers.  And this rapacious capture of consumer cash has not exactly provided Canadians with world class broadband.  Instead, Canada falls further and further behind in global broadband rankings, evoking outrage from consumers upset that the upgrades they were sold on aren’t exactly in a hurry to arrive, and even when they do, the usage caps, throttles and ever-increasing prices remain.

That’s not broadband I can believe in.

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It’s your job to ferret out:

• Who is simply reading talking points without verifying if they are true or not?
• Who is the straightforward person playing it straight down the line?
• Who is the industry hack working for an Astroturfer paid by providers to sucker you into paying more for your broadband?

Bonus points for identifying and debunking the industry talking points from this misguided series of reports aired last year on KFWB Radio.  Answer in the Comments section!

The players:

• Larry Irving
• Chris Sedens
• Robb Topolski

If you are new to Stop the Cap! you can read and participate in our comment section by clicking the headline of any story.  You’ll find the comments at the bottom, along with a place where you can add your thoughts!

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When otherwise intelligent writers get sucked into industry propaganda and advocate against their own readers’ best interests, the blowback can become substantial.

VentureBeat is about to learn that principle firsthand as it bungled a piece about wireless carrier mobile data growth into a confusing article claiming “Net Neutrality” will be used by AT&T and Verizon to “drive Sprint and T-Mobile into the ground.”

What?

Authors Tim Chang and Matt Marshall then journey across the landscape of mobile data networks in the United States, regularly stopping to hammer home the requirement for limits on usage, blaming it mostly on online video.  The factual potholes litter the landscape, unfortunately:

What that means is the country’s major wireless carriers — Verizon, AT&T, Sprint and T-Mobile — are going to have to abort the all-you-can-eat mobile data plans most of us take for granted. It’s just getting too costly for them to give us the service on their networks for the pricing they offer today.

Video 'is the big problem' justifying Internet Overcharging for wireless mobile data, yet one of the nation's largest providers sees no problem providing its own video service on its network.

Actually, none of these carriers provide unlimited all-you-can-eat mobile data plans.  They either explicitly or implicitly (buried in the fine print) limit consumption, usually to 5GB of usage per month.  What happens beyond that does vary by carrier.  The big four impose overlimit penalties at punishing prices.  Some smaller carriers, like Cricket, simply throttle your connection or suspend service on a case-by-case basis.

The reasons for these limits:

• Limited spectrum (the frequencies the provider operates on) may not sustain demand using currently available technology and network design. Could additional spectrum, new technology standards, and more localized delivery of data reduce network congestion?
• Lack of competition.  The two primary carriers, AT&T and Verizon, have essentially provided nearly-equivalent pricing.  Their robust coverage areas make either a natural choice for most users who travel.  Sprint and T-Mobile have larger gaps in coverage.  Spectrum auctions, which is how carriers obtain new blocks of frequencies, raise huge sums for the government, but those costs inevitably do get passed down to customers.
• Psychological: Consumers accustomed to limited wireless broadband from the outset are less likely to complain if it is taken away later.
• Economical: Data packages with low limits produce profitable results, with the future possibility of earning even higher profits from subscribers who routinely exceed them and pay penalties and fees, or for carriers to create and market “additional usage packs.”

Jon Metzler, an industry consultant who has conducted research for the CTIA, says he’s heard estimates that a YouTube video of 3-5 minutes costs $1 for a carrier to handle. At this rate, a carrier would be killed when a typical user streams a mere two videos a day. That day is coming soon, because of the race by the smartphones to offer these cool video services.

Of course Metzler works for the CTIA-The Wireless Association, an industry trade and lobbying group.  They have a vested interest in pushing the “bandwidth flood” theory to preserve carrier pricing models.  The factual basis for this YouTube assertion has been challenged as well, once even by a VentureBeat reader.

Verizon doesn’t see wireless mobile video as the harbinger of doom — it sees it as a feature it can rake profits from, charging $13-25 a month extra for access to VCAST Mobile TV, a Verizon Wireless portal filled with video clips and streams.

It’s always ironic when carriers complain about the impact of services like video, while also heavily marketing their own services that, by their nature, impact their network.  YouTube bad, VCAST good.

So far, it hasn’t really been enforced, or hasn’t mattered much because very few users have hit that ceiling yet. But the carriers charge extra if you want to use more. “Net neutrality,” the concept that governs access the Web, whereby anyone anywhere can access any Web site anytime, won’t have a chance in wireless.

It has been enforced.  Horror stories of wireless bills running well into the tens of thousands of dollars are becoming more common, as customers end up reading marketing copy that claims usage is “unlimited” and then defines it in a sea of fine print as really amounting to 5GB of usage.  Many customers have no idea what a gigabyte represents, either.  The keyword in VentureBeat’s quote is “yet.”  As bandwidth usage continues to increase because of the growing size and scope of online services (video among them, but not exclusively so), more and more customers will find themselves paying penalty overlimit fees for using “too much.”

Net Neutrality has nothing to do with this discussion except if/when carriers impede access to content or exempt their own services (like VCAST) from any usage limitations or allowances.

But conveniently, it does give them a nice way to drive Sprint and T-Mobile into the ground. Those two carriers have weaker financial resources, and so won’t be able to withstand the costs of subsidizing all-you-can-eat data plans as long.

Neither carrier offers all-you-can-eat data plans, so the argument is moot.  The more likely scenario, should providers continue under the “barely regulated” principles of oversight we’ve had for at least the last decade, is that there will be additional mergers in the marketplace.  T-Mobile uses the same wireless network standard AT&T does, and Sprint would be a natural fit with Verizon Wireless, both using the CDMA standard.  Regulators looking the other way could easily reduce competition further with additional mergers.

It’s clear net neutrality won’t last. Think of it this way: Wireless bandwidth is becoming as valuable and critical as basic electricity or gas utilities to our home. Yet nobody expects to get all you-can-eat electricity or gas. Why should broadband be any different in the long-run?

More nonsense.  Net Neutrality doesn’t belong in this topic at all.  The old power and gas chestnut is back again.  The one service that is most comparable to this subject, and the one the propaganda/Re-education campaign never addresses, is the telephone business.  Telephone calls travel across both wired and wireless networks as data packets, just like Internet services do.  Wired telephone companies have provided local flat rate calling for decades, and both wired and wireless carriers are moving into flat rate calling for local and long distance calling.  The authors advocate the direct opposite direction for Internet service.  The reason, of course, is that carriers are trying to exert new revenue streams from their broadband services with Internet Overcharging schemes.

But take wired broadband as a proxy, because it has been studied more. The marginal cost of delivering wired broadband is projected to decrease roughly 10 percent a year, in terms of total costs per GB, according to a study by Stuart Taylor, leader of the North American Mobile segment within the Cisco Systems Internet Business Solutions Group (IBSG). This figure factors in the additional investment needed to keep networks growing (capital expenditure and operating costs). Broadband revenues per GB are declining in the order of 15 percent per year, however. When you combine the cost and revenues in broadband, you get a breaking point in the next 5 years or so, Taylor predicts.

This was outright disingenuous.  The authors admit that the costs for both the delivery of bandwidth and the bandwidth itself are declining, but that somehow the “capital expenditures and operating costs” are going to cause a breaking point?  Exactly how this article never explains, and the link provided to back up an assertion about wired broadband ostensibly made by Taylor never appears in the article being linked.

The truth can be found in the financial reports of most wired broadband providers — profits are up, costs are down, and life is good.

For mobile data, “killer apps” often end up meaning “bandwidth-killer” and “profit-killer”: namely, mobile streaming video today, and soon online multiplayer mobile gaming. Not to mention always-connected social apps like Facebook mobile, Twitterberry and SocialScope, which will often have users receiving background updates from hundreds if not thousands of contacts.

One can rapidly lose confidence in the assertions of an article filled with this many factual errors.  Mobile video certainly isn’t killing the profits of Verizon Wireless when they are marketing VCAST subscriptions and pocketing much of that revenue.  One would think if these concerns were true, Verizon Wireless would be in a hurry to exit the business.  Multiplayer mobile gaming typically relies on very compact “control data” to indicate player movements and actions over a network that is already slower than wired provider networks.  The smaller the amount of data, the faster it can reach other players. The amount of data actually consumed by many of these games is much smaller than many people think.

Twitter moves individual messages so limited in size, they rival text messaging, a mobile phone product so front-loaded with extra fat profits, especially for those with no “texting” service plan, the neighborhood loan shark wouldn’t think of charging those kinds of rates.  The amount of bandwidth consumed by most of these kinds of applications carries far less impact than the authors want you to believe.

In some industries, even pricing is hard to change. The Internet has created a giant tidal-wave of market value destruction in several industries: print, movie, and music. Billions of dollars of value from companies in these industries have been shed, and it will never come back. This is great for consumers, but not great for the content providers. The providers of wireless bandwidth don’t want this to go the same way. If they stick to low pricing, they’ll surely ask themselves: “What the hell are we doing?”

“Blame it on the Internet” is the new Blame it on the Bossa Nova.  The authors ignore the run up in valuation of many of these companies as part of the enormous stock market bubble and accompanying merger mania that this country experienced over the past decade.  Large corporate media became larger, with higher and higher values assigned to companies, and more and more debt carried to acquire them.  Broadband providers are not comparable to content providers here.  Content providers create and distribute the content that drives consumers to do business with the broadband providers in the first place.  Without that synergy, we could all live happily ever after with dial-up or low speed broadband.  Quality broadband content drives subscriptions to broadband service providers.

What broadband providers are really arguing for in all of this is a justification for them to be paid twice — once by consumers subscribing to their service and then a second time by content providers who deliver their content to those consumers.  It’s the equivalent of making you pay for making a long distance call -and- the person called also has to pay.

The million dollar answer to this dilemma is simple.  Broadband providers can improve their networks and market extra speeds to consumers looking for a faster online experience.  They can individually license content that doesn’t exist online and provide it to subscribers and split the revenue with the content owner.  They can market support services to help consumers use their service, and they can create customized bundles of services which promote loyalty for a consumer’s online, telephone, and cable TV business.

The shining beacons for the wireless industry are the cable companies: They’ve long offered differentiated pricing plans, packs like ‘basic,’ ’silver’ and ‘gold.’ If you talk with content company MTV, you’ll find out they are insanely jealous of a cable company like Comcast.

There is not a shred of evidence to back this up either.  MTV doesn’t believe in differentiated pricing plans, particularly on the cable side.  Their contracts with cable operators routinely demand the operator place their owned networks on the standard basic tier.  They have no patience for a-la-carte pricing of their various networks, where consumers can pick and choose the ones they wish to receive.  The only “silver” and “gold” they care about is in the money they collect from every cable and satellite subscriber who is forced into paying for their networks whether they watch them or not.

After everything was said and done, readers had an opportunity to share their views, and many did not like what they saw.

• “You lost me when you compared wireless network bandwidth with electricity and gas.”
• “There is no analogy to the utility world: it’d be like paying a higher price for drinking water and a lower one for shower water out of the same pipe; just because drinking water delivers more value per liter.”
• “You clearly don’t understand what “net neutrality” means.”
  
• “Hint: pricing is born of what the market will bear.”
• “Since it wasn’t mentioned in the narrow scope of this article, how do the insane profit margins from ever-so-popular text messaging play into supporting wireless data networks?”
• “It pains me when techies mix half baked economics into an analysis that is predisposed against a carriers. Oh the headaches.”

We don’t either.

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The United Kingdom is the latest country to face the downside of arrogant Internet service providers throwing hissyfits when people actually use their broadband connections.  When broadband service providers entice investors with promises of fat returns, assuming most people won’t actually use those high speed connections for anything except web page browsing and e-mail, they get mighty upset when they catch their users watching online video instead.

One of the benefits of broadband is that it provides fast speeds to let people do more than what they used to with dial-up access.  That happens to also be one of the major selling points to get customers to part with a significant sum of money each month for the service.

They just don’t want you to use it.

British Telecom (BT) is the latest ISP to complain that the BBC’s iPlayer, which allows British residents to stream TV and radio programming on demand, and YouTube are using their broadband pipelines, but not paying them anything to do so.

That conveniently ignores the fact that their customers throughout the UK are paying them to deliver that connectivity, providing them with a handsome return.

Internet Service Providers not content with earning money from one side, now increasingly want a piece of the action on the other.  It’s the equivalent of making a long distance call, but asking both the person calling -and- the person called to pay a fee.

Since the companies providing the content consider the payment demands ridiculous, ISPs have started singling out certain types of traffic on their network and slowing it down, ruining picture quality and annoying their customers trying to access the content.

BT implemented a “Fair Use” policy for one of their broadband packages which lets them cut the speed of online video from the normal 8Mbps down to 896kbps between 5pm-12am each day.  BT claims that’s enough to watch online videos, but that very claim would negate any benefit from slowing down the connection.  How many TV shows do people stream at the same time on the same connection?

In fact, BT’s policy does impact on the quality of the video streamed to the viewer.  The iPlayer is capable of sensing your broadband speed and reducing the quality of the stream to match the speed you have available.

Of course, should the BBC agree to pay BT some sort of transport fee, they might find their way clear to take the speed bumps out of their way.

A founding principle of Net Neutrality is to treat online content equally when transporting it.  Your stream from the BBC should not be hampered while a stream from someone else is not, just because they paid extra.  Are bandwidth costs increasing?  No, they are decreasing.  There is no compelling argument to prevent providers from keeping up with demand.  If they want to earn money from content, they can produce their own and provide it to subscribers on equal terms.

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Cisco is back with their latest report about the “coming exaflood” set to alarmist headlines in the press.

In the spring, the prevailing theory of one “research group” was that bottlenecks would ruin the net’s usefulness by 2011.  That was the one adopted by Time Warner Cable’s unsuccessful efforts to convince residents in four cities that Internet Overcharging was a good idea.  Last month, Australian breakfast television viewers were dropping muffins back on their plates when they were told the Internet was going to be subjected to a massive traffic jam by 2012.  The date of the potential online apocalypse has been pushed forward to 2013 this month, the last year Cisco covers in their data model.

Of course, all such “exafloods” can be mitigated to some degree by purchasing Cisco products and services to handle the tsunami of traffic.

Companies that have a vested interest in doing such studies, in this case to help spur upgrades, always casts suspicion over the results.

The results of those studies are often sold to advocacy organizations (if not quietly funded by them outright) to integrate into lobbying campaigns.  In the push for “exaflood” panic, some of the lobbying groups seek government investment in broadband infrastructure on behalf of their clients, others want to use the Internet growth argument to prove there is a need to engage in Internet Overcharging to finance construction of improved networks (even at a time when some of those companies enjoy billions in profits and have systematically reduced investment in maintaining and expanding those networks).  Cisco’s interests may be closer to home — generating revenue for themselves.

One man who doesn’t have anything to gain from the results is Andrew M. Odlyzko, who runs Minnesota Internet Traffic Studies at the University of Minnesota, an ongoing project to soberly analyze Internet growth.  Unlike others who have repeatedly warned about Internet brownouts, crashes, and slowdowns, Odlyzko doesn’t have a “dog in this fight.”  Once you strip away the self-interests many others have in promoting an “exaflood” agenda, the simple fact remains: with growth in demand also comes growth in new technology and capacity to meet it.  Odlyzko continues to point towards slowing growth.

“In spite of continuing stories about a flood of video overwhelming the Internet, global wireline traffic shows no sign of moving up from its approximately 50 to 60% per year growth rate. If anything, the trend lines point down, not up,” according to the results posted on his website.  Cisco had to echo Odlyzko’s predictions during this past year, but the company blamed the global economic downturn in their report for the decline in the growth curve.

The Economist also debunks the panic attacks:

Talk of exafloods is nothing less than scaremongering and has no bearing on reality, even though video traffic is increasing substantially, says Grant van Rooyen of Level 3, a company based in Broomfield, Colorado. It operates network backbones that carry around a quarter of the world’s internet traffic. “We estimate that 50-60% of traffic today is video, but it’s been that way for the last three to four years,” he says. “We really don’t think we’re going to see a massive failing of the infrastructure.”

Level 3 has been regularly upgrading its capacity, and will continue to do so, says Mr van Rooyen. “This isn’t like building a toll-road with an inflexible infrastructure,” he says. “In the network world, we are able to scale infrastructure and capacity in real time.” When bunches of optical fibres are laid in the ground or on the seabed, for example, not all of them are immediately used, or “lit”. So the capacity of a link can be increased by lighting more fibres. Even when all the fibres are lit, capacity can be further increased by upgrading the equipment at each end of the fibre. Technological progress means the amount of information that can be squeezed down each fibre is steadily increasing.

Back in 1995 Bob Metcalfe, an internet guru and the founder of 3Com, a network-equipment maker, predicted in a magazine article that the internet would suffer “gigalapses” and grind to a halt by the end of 1996. He promised to eat his words if it did not. His gloomy prediction was proved wrong, and in 1997 he duly put the offending article in a blender with some water at an industry conference, and ate the resulting pulp with a spoon.

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Marcel Boyer

Marcel Boyer penned an opinion piece for Canada’s Financial Post this week attacking the virtues of Net Neutrality as short-sighted and potentially devastating to the Internet if codified into law.

Boyer, in a piece called “Don’t Throttle the Net,” advocates precisely that, applauding broadband providers for traffic shaping, which artificially slows non-preferred Internet traffic delivered over broadband networks.

There are many facets to the net-neutrality issue, including pricing and broadband allocation, which are central. Proponents of net-neutrality call for government intervention and regulation to prevent broadband providers from prioritizing or interfering with the data that flows in their networks. On the other hand, broadband providers are arguing that even though they continue to invest in their networks, their customers would still be affected by congestion during peak periods in the absence of traffic management measures. Other large networks face the same type of issues. New applications (video streaming and VoIP, among others) require a high quality of service assurance, making a more reliable network necessary.

Boyer delivers the usual talking points about bandwidth pricing and competition that Stop the Cap! readers are all too familiar with:

Making it illegal for broadband companies to offer a diversity of choices would destroy incentives to invest continually in improved Internet bandwidth, quality and security. Net-neutrality legislation would unnecessarily regulate a free and competitive market when there is no real evidence of consumer harm.

Let network owners and operators as well as service providers differentiate their offerings and price them the way they choose. Customers would benefit from more diversified offers by selecting the ones best suited to their needs. In such a competitive context, network operators and service providers would routinely aim to satisfy demand for Internet services most effectively while simultaneously aiming to manage the growth in peak demand.

It is to the advantage of consumers to allow competing vendors to experiment with various price and service combinations. From this discovery process, a portfolio of winning offerings will emerge. As long as competition is present and sufficiently intense, and assuming the level of information available and provided to consumers enables them to make informed choices between the various offerings, regulation of price schemes is neither necessary nor desirable as it would stifle innovation and obscure the best offerings and pricing schemes.

From an economic point of view, policies that would restrict the ability of broadband providers to manage their networks are likely to do more harm than good. Regulation of prices and offerings, products and services, has generally resulted in higher costs and lower benefits, especially when competition is present. The complexity of market dynamics poses particular problems in emerging industries. Instead of adopting regulations that could induce unwanted harmful effects, it is preferable to mandate the Canadian Competition Bureau to investigate when there is evidence of abuse or unlawful actions from broadband providers.

The impetus for the opinion piece was this week’s news highlighting Canada’s rapid decline in standing among top industrial nations’ broadband services.  The original report specifically called out the impact of draconian usage caps and throttles which reduce usage, limit innovative high bandwidth services’ entry into the Canadian market or bypass it entirely, and the potential economic and competitive impact on Canada’s economy as a whole.

Boyer’s premise presupposes there is a healthy competitive marketplace for broadband in Canada, a conclusion ridiculed by many.  Most Canadian cities have two primary choices for broadband, a usage capping phone company or a usage capping cable company.  Smaller independent providers typically resell bandwidth obtained from Bell or other similar entities at wholesale rates.

Despite pricing more than $15 a month higher in Canada than in the United States, and healthy financial returns among most of Canada’s providers for their broadband divisions, the “continual investments” in bandwidth Boyer claims are hardly eye popping.  Incremental speed increases, usually accompanied by rate hikes, and the imposition of often paltry usage caps has artificially reduced consumption, which also reduces the need to improve infrastructure.  Indeed, while fiber optics deployment is becoming increasingly common in the United States, it is not nearly as common in Canada.

Canadians find little diversity in pricing and service levels in a marketplace that nearly always imposes limits on consumption, doesn’t provide robust access in rural communities, and typically delivers slower speeds than their counterparts in the United States are providing customers today.  East York (near Toronto) residents, for example, can obtain “blistering fast” 10Mbps service from Rogers for about $60US per month, limited to 95GB of consumption.  Overlimit fees are $1.50/additional GB.  Bell offers “speed of light” Internet access at “up to 16Mbps” for $82.95 a month (100GB usage cap – $1.00/additional GB, billed in increments of 100MB, $30 monthly maximum applies.)

Head across Lake Ontario south to Rochester, NY and Time Warner Cable provides “Turbo” service offering 15Mbps, currently without any usage cap, for $50.00 a month.  Verizon FiOS pricing provides 20Mbps service with no cap for $54.99 a month.

In the absence of significant competition, duopoly-style pricing usually results, and that’s precisely what has happened in Canada.  Allowing the “wild west — hands off” approach Boyer advocates merely guarantees more of the same.  Providers in the United States, already enjoying phenomenal returns, would love to adopt the Canadian approach.  They’ve already been increasing rates, decreasing investment in their network infrastructure as a percentage of revenue, and enjoying the benefits of reduced bandwidth expenses.  The only components left are usage caps and throttling broadband applications they don’t own, control, or partner with.  Experiments are being attempted on some of these fronts now.

The end result: even higher profits and locking broadband into a rationed, expensive, and slow backwater.

Boyer should know that wired broadband competition beyond the aforementioned duopolies in most Canadian markets comes only from independent ISPs typically reselling wholesale bandwidth (which is now also being capped) and a few independent providers who may wire limited areas in large cities.  There will never be a free market paradise in cable television – the traditional one company per city approach is well rooted throughout North America.  Wireless is even more heavily capped and expensive than wired service.  And telephone companies, outside of Verizon in the United States, are loathe to aggressively deploy fiber optics unless required by local market conditions.

Broadband throttling and capping, particularly to discourage online video consumption, comes aggressively when companies have a vested interest in preventing erosion of their traditional video programming business model.  Both Rogers and Bell are in the business of delivering television entertainment to Canadians.  Should a sufficient amount of that entertainment be available online, some consumers may dispense with the video package and rely exclusively on the Internet.

Speaking of vested interests,  the Financial Press had plenty of space to print Boyer’s article, and even concluded it by noting his title:

Marcel Boyer is vice-president and chief economist of the Montreal Economic Institute.

Apparently things got throttled at that point, because they forgot to include one additional affiliation Boyer holds: Bell Canada Professor of industrial economics at the Université de Montréal.  How ironic.

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If you’re a broadband provider throwing a money party by charging top dollar for usage based Cap ‘n Tier rationing plans, why not spread some of that money around?  One company that wants a piece of the action is Highdeal, a German owned company that wants to sell providers the billing system to extract pay-per-byte-bucks from customer wallets.

Highdeal’s chief technology officer, Fergus O’Reilly talked to Telephony Online about how they’re going to market their products for usage based billing.

On moving beyond flat-rate broadband: Operators are realizing that the flat-rate model we had for broadband is no longer tenable. It’s hard to roll out [usage-based models] when subscribers don’t know how much a gigabyte is or what the term bandwidth means. Some [providers] have done better than others. In the Canadian market, for example, it’s getting to be accepted. Rogers has done a good job informing customers about their usage and charging them for overage with cap-and-overage-type schemes. In the US, it’s been a little more difficult. Time Warner Cable let slip that they were doing something and got negative press for it. It became difficult for them to roll that out — one step forward, two steps back. But overall throughout the market, pretty much everyone is equipping themselves with the policy management systems they need to measure and qualify bandwidth usage. The flat-rate model for broadband will change, and we will pay depending on usage, whether that’s measured in [quality of service], absolute bandwidth or a number of those factors.

The system that exists today (that is already very profitable) is always defined as ‘yesterday’ and something ‘we need to move beyond,’ while the highway robbery of overpriced tiers and overlimit fees is the ‘only tenable way forward.’  Not really, of course.  But this is an example of a company with a vested interest in that outcome — namely, a product/solution to sell that would not exist without these kinds of billing schemes.  They garner favor in industry circles by helping to throw the ball around, hopefully establishing the premise that usage based billing is conventional wisdom.

It’s tougher to sell cap-and-overage schemes. Unfortunately many of the charging systems operators have in place are relatively simplistic. And moving to these more sophisticated schemes — time-shifting and proposing a bandwidth boost — many times the blocking factor is, ‘Well, I don’t know how to do that.’ So we propose a very flexible charging system that makes that easy so you can have these dynamic business models that will make more sense for the consumer.

Actually, developing a billing system that pilfers the wallets of consumers, no matter how complex or simple, will not make any sense for customers.  What Highdeal proposes is a billing system that allows providers to rob customers in a sophisticated way, instead of the street mugging wallet extraction approach.  But whether it’s the Bernie Madoff system of billing, or the guy with the bat in the dark alley, consumers are still going to be victimized, and they’ll know it every time they get the bill.

Is Highdeal a raw deal entirely?  No.  Some of their models might actually represent some real world solutions to network congestion, particularly one that could communicate with bandwidth providers and software to schedule bandwidth intensive, but non-critical applications during off-peak usage times.  One such proposal would signal an online backup program to launch when network congestion is reported low by a provider.  Another model might allow consumers to pay more for faster connections to complete individual tasks.  Paying reasonable prices for reasonably faster speeds is not an issue for Stop the Cap!

But companies that buy into industry theories and claims in order to help score a sale have a considerable conflict of interest in being considered a credible source on what consumption and billing models are workable and which are not.

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